Specific financial recommendations are like dental procedures – they are made when the circumstances make the recommendation appropriate. For the doctors with the right circumstances, we have been recommending Cash Balance plans for years to accelerate toward retirement and drastically cut taxes. The purpose of this post is to give an overview on what Cash Balance plans are and how they work.
In the world of investments, one way to classify stocks is to differentiate between what are known as “growth” and “value” stocks. The difference is this: growth stocks are relatively more expensive than value stocks; in other words, a growth stock means that an investor must spend more upfront to own the same amount of company assets.
In recent years, the US stock market has significantly outperformed international markets; this performance is exaggerated by the fact that we live in America, so all the financial news is about the performance of the US Market—the Dow and the S&P. As of September 30, 2020, the S&P 500 had outperformed the global market1 over the preceding 5 years by 7.92% per year. This disparity has left many investors to re-evaluate the benefits of holding international investments in their portfolio. While international performance in recent years has lagged behind the US, it’s important to remember that recent performance is not an reliable predictor of future results.
2020 has been a hard year for investors. News about the economy has been bleak, with headlines telling the story of high unemployment, falling GDP, and the onset of the first recession since the 2008 financial crisis. The stock market tumble earlier this year was swift and painful for many investors, but the recovery has been equally fast and surprising—by mid-August, the S&P 500 index had fully recovered and was once again reaching record highs. The same can be said of global stock markets. In the face of such troubling news, many people are left wondering, has the stock market lost touch with reality?
In the face of the coming presidential election, many investors wonder how the outcome of the race for the White House will impact market returns. While it is easy to get caught up in the excitement and noise of the moment, history shows that the winner of a presidential election is not a reliable predictor of what will happen in the stock market. Election campaigns and biased news media will argue that “this time is different;” however, we believe that the sun will keep coming up and the economy will drive forward regardless of who is president.
Since the inception of Practice Financial Group nine years ago, the overarching financial and personal philosophies for our dental and medical clients have not waivered: Become clinically exceptional at what you do. The more you love it, the better you’ll be. Learn to make money from your clinical skills with a servant’s mentality: having the focus of giving more value to your patients than you take from them. Do this in one location and become as profitable as you can. Maintain a balance of work and life; take care of yourself physically, emotionally, spiritually, etc. Employ the “one house, one spouse” rule, particularly the one spouse part. Divorce is the highest tax bracket. Nurture your marriage, make it great. With the help of a trusted advisor, develop a tax-efficient system to pay off debt and invest your money using low-cost, passive mutual funds.
When I was young my family would often watch Frank Capra’s “It’s a Wonderful Life” at Christmas time. Many years have passed since the last time I saw the movie. But this year, with it showing free on Amazon Prime, I let the kids stay up late one night and we watched this Christmas classic, popcorn and all. As the story unfolded, I found myself seeing George Bailey differently than I ever have. In many ways I saw myself in him, and I saw many of you. Trying to do the right thing. Trying to meet the demands and expectations of life. Trying to run a small business. Trying to raise a family. Trying to balance the expectations and dreams of a life of adventure and charm with the realities and humdrum of the daily grind. As the pressures mount, George breaks down and loses it. With this viewing, instead …
Each year Warren Buffett, the greatest investor the world has ever known, writes a letter to the shareholders of his company, Berkshire Hathaway. This letter has become somewhat of a “secret scroll” for investors and business geeks alike, with Mr. Buffett pouring out wisdom and wit in his typical style of brutal honesty. I have been reading this annual letter for years and recommend it to you if we share this interest. (Last year, I summarized Buffett’s 2017 letter on this blog, which you can read here: https://practicefinancialgroup.com/investment-optimism/). For those of you who want the summarized version of this year’s letter applied to doctors, keep reading….
As the second longest bull market in U.S. history continues, many investors are worried about when the inevitable downturn will occur. While few investors enjoy market “corrections,” long-term investors understand they are inevitable, can be expected every couple of years, and are part of the necessary tuition to participate in the stock market. We hear concerns about the market often and its inevitable future downturns. One specific worry we hear is that “the market is at an all-time high.” This is concerning to some because they fear that if the market is at an all-time high, then it must be at its tipping point, ready to turn at any moment; what goes up, must come down, right? Not always. The price of the “market” is a representation of the health of the current (and expectation of the future) overall economy; the reason the market goes up over time is that the economy …
(This blog post, 4 Charts Every Investor Should Know, was compiled and revised from a newsletter sent out by Loring Ward, our investing partner). Sometimes a picture really is worth a thousand words. In this post, I’ll share four charts that I believe every investor should understand. These charts focus on some of the basics of investing, like focusing on the long term, diversification, and not letting emotions drive your portfolio. #1: Let Markets Work for You Good things come to those who wait—and to those who don’t let short-term news events scare them out of staying invested for the long-term. Every generation of investors has had its reasons to worry and pull out of the market from the Great Depression, World War II, and Vietnam of earlier generations, to the more recent Black Monday, dot com bubble, and Great Recession. But if you had invested $100 in the U.S. …