We all want to know “how we are doing” with our investments. Investors want some sort of guideline to compare their own portfolios’ performance with, so they tend to compare their performance to the performance of a market index.

Many people don’t realize, however, that benchmarking to an index doesn’t make sense for most investors. Also, the indexes may not represent the overall market or economy. Right now, for example, even though the S&P is up, this is due to just a few stocks. If you were to take these stocks out, the market is actually down year to date!

Here are four reasons why we do not recommend looking at the indexes to assess the performance of your own portfolio.

1.    Your Portfolio’s Holdings Don’t’ Match the Indexes’ Holdings

Still, investors want some sort of benchmark when assessing the performance of their personal investments, so they tend to compare their portfolios’ performance to that of an index, such as the Dow and the S&P 500.

The Dow Jones Industrial Average (DJIA) is a stock market index that tracks 30 large, publicly owned blue-chip companies trading on the New York Stock Exchange (NYSE) and Nasdaq. The Standard & Poor’s 500 (known as the S&P 500), is a stock market index that includes the 500 largest companies (in terms of total market capitalization) listed on the New York Stock Exchange or NASDAQ.

Although these indexes provide us with useful information about how the broader market is performing, they are not so useful for understanding how your own personal portfolio is performing. This is because the holdings in your portfolio are not necessarily the same as those in the index.

For example, if your portfolio consists of 75 percent stocks and 25 percent bonds, you cannot make an “apples-to-apples” comparison with either the Dow or the S&P 500 because both of those major indexes consist entirely of stocks. Even if you had an all-stock portfolio, you likely would own some small-company stocks, which would not be represented in the Dow because it contains just 30 large-company stocks. And if you owned stocks of non-U.S. companies, these would not be included in the S&P 500, which is made up of 500 large U.S. companies.

Your portfolio may include fixed-income, international or small-cap equity stocks that are not part of these indexes.

The diversification in your portfolio may be of benefit to you over the long term.in reducing volatility; but it will produce differences in the relative performance of your portfolio in the short term.

2.    Different Companies Make Up the Indexes Over Time

Another reason why investors need to be careful about comparing their own portfolios’ performance to an index is that the companies that make up the indexes are always changing, based on performance. The 30 companies that compose the Dow are not always the same ones. Similarly, the 500 companies that compose the S&P 500 are not always the same ones.

In fact, if you compare the list of the top 10 companies names in the S&P 500 now versus 20 years ago, do you know how many companies made both lists? Just one — Exxon Mobil. It’s the only corporation in the United States that made the list in both 2003 and 2023.

However, even though most of the names on this index have changed, most investors are still allocating to a cap-weighted S&P 500 fund. This means they are, in essence, betting on the continuance of existing trends in the market — betting that the same large names will continue to generate strong returns.

3.    The Markets Have Become Concentrated

A third reason why benchmarking doesn’t make sense for most investors is that the S&P 500 is now more concentrated than it has been in decades. For example, Apple and Microsoft now represent more than 15 percent of the overall S&P 500 index. If you add Nvidia, Facebook, Google and a few of the larger technology companies, fewer than 10 stocks represent more than 30 percent of the market cap of the entire index.

All the indicators — including the advance/decline line, the new highs and new lows list and stocks above or below relevant moving averages — show there is not a lot of participation.

Overall, the top 10 companies in the S&P 500 have accounted for as much as 35 percent of the index’s market cap in recent months. This concentration can leave your portfolio vulnerable to potential losses if interest rates remain high and stock values decline.

The market has been very narrow in terms of performance. The S&P 500 is market cap weighted. It is up approximately 9.5 percent year to date, but the equal weight S&P index is actually negative year-to-date.

We constantly screen the underlying holdings within our investment committee. We look at how funds are doing relative to their peer group, rather than the S&P 500, when so few companies are responsible for most of the gains. The S&P is generally a good index to compare the stock portion of your portfolio over time, but the comparison will lose some of its relevance in a portfolio that is composed of both stocks and bonds. Historically, reducing bond market exposure will increase performance, but it will also increase volatility.

4.    Market Indexes Aren’t Relevant to Your Personal Vision

Finally, benchmarking to market indexes doesn’t make sense because market indexes do not take into consideration your personal vision, lifestyle and financial goals.

The most important benchmark is whether you can maintain and enhance your standard of living, not some market index. Your investment strategy needs to focus on your needs, wants and vision — not a random number or value. Moreover, the index performance does not take into consideration your tax status.

We focus on you and achieving your vision. Rather than taking an investment-centric approach that looks at the portfolio and tries to determine how your life can be, we want to understand what your personal vision is for the future and then develop a holistic plan to achieve it. The investments themselves are simply a means to an end. We call this Personal Vision Planning^®.

Why are you investing? Is it to beat an index or to achieve a personal goal? Is it to select the newest investment or to live your dream? As we face volatile markets, portfolio fluctuations and dire news, we often focus on the value of our accounts, not the value they bring. If we can meet

our goals today and tomorrow, then the absolute numbers really don’t matter. Our team is here to help you do just that — meet your personal goals now and in the future.

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One cannot invest directly in an index. Past performance does not guarantee future results. Investing involves risk regardless of the strategy selected.

Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Carver Financial Services, Inc., was established in 1990 with the vision of making people’s lives better — clients, team and community. With this mission, Carver Financial Services has grown to be one of the largest independent financial services offices in the country, managing $2.3 billion in assets for clients globally, as of March 2023. You can reach Randy directly at randy.carver@raymondjames.com and in the office at (440) 974-0808.

On July 16, 1999, John F. Kennedy, Jr., was piloting his plane to Martha’s Vineyard from Essex County, N.J., when he experienced a deadly phenomenon known as vertigo. This phenomenon commonly affects pilots who fly in low-visibility conditions, such as those faced during night flights or flights through clouds without the proper training.

According to the final report of the accident by the U.S. National Transportation Safety Board (NTSB), Kennedy’s disorientation caused the crash that killed him, his wife, Carolyn Bessette Kennedy, and her sister, Lauren Bessette.

What Caused JFK’s Fatal Plane Crash?

Kennedy was a non-instrument-rated pilot. He was not yet qualified to fly using instruments alone. The NTSB report noted that haze and the dark night contributed to Kennedy’s spatial disorientation and loss of control.

Pilots who cannot see the horizon must rely on instruments to tell if they are in level flight or if they are banking. A disoriented pilot can bank a plane into a fatal spiral. The report concluded that the crash occurred to pilot error.

When pilots experience vertigo, they may feel as though the aircraft is turning in a different direction than it actually is. This can lead to incorrect control inputs, which can result in a loss of control of the aircraft.  This can be similar to an investor misreading current conditions and making decisions that are detrimental to their portfolio and planning.

One of Kennedy’s flight instructors offered to fly with him that night, but Mr. Kennedy said ‘”he wanted to do it alone,” the instructor told the investigators who prepared the report.

VFR vs. IFR Flights: Different Requirements for Different Situations

VFR stands for “visual flight rules,” which means that pilots navigate their aircraft using external visual references, such as the horizon or landmarks. IFR stands for “instrument flight rules,” which means that pilots rely on their instruments to navigate their aircraft.

IFR flights require a higher level of training and certification than VFR flights. Pilots must learn how to read and interpret their instruments. Perhaps more significantly, IFR pilots must learn to trust their instruments versus their feelings about where they are.

If Kennedy had the proper training and or another pilot with him who was experienced in instruments rated for the conditions, his death could have been avoided. In the 15 months before Kennedy’s accident, he had flown either to or from the destination area about 35 times.. Within 100 days before the accident, Kennedy had completed about 50 percent of a formal instrument training course. Still, his training was not sufficient for the problematic conditions of the flight he attempted to complete.

The same is true with investing. When people rely on their own limited knowledge and take actions that are detrimental to their long-term plans, it can have devastating consequences for them and their families.

Financial Planning Also Requires That We Rely on Instruments

Just as with flying, it’s important to rely on instruments and experience, versus feelings, to avoid mistakes in financial planning. Although a financial mistake may not take your life, it can be very costly. Such mistakes can be avoided by working with an experienced team.

In today’s world, we are flooded with information. Much of it is inaccurate or incomplete, and much is irrelevant to our personal situations. If you react to the information, you obtain online or from acquaintances, it can cause a “crash” of your portfolio’s value and impact your overall financial planning.

A qualified pilot and crew could have made the Martha’s Vineyard trip easily and without incident. Their experience and their training for the conditions encountered could have made this an uneventful trip. When it comes to financial planning, our highly experienced, credentialed, and competent team can help you navigate the haze of the increasingly complex world of investments, tax management, retirement planning and other areas of financial planning.

We Are Your Financial Pilots…Or Co-Pilots, for Those Who Wish to Fly Solo

Wealth management is about reaching specific destinations safely and on time — and ideally, you want to have fun on the journey. An experienced team can help you reach your destination safely and on time while enjoying each day. Even if you want to be your own “pilot,” it is important to have a qualified team to back you up.

If you want to be the “pilot” of your own financial plan all the time, it’s important to have the proper training and temperament. It is a challenge for one individual to stay current on all the constantly changing tax laws, investment rules and other information relating to the complex field of financial planning. We believe our clients are best served by a team of experts with different expertise.

In flying, training and certification for IFR flights are essential for pilots who want to fly in challenging weather conditions. For pilots who fly only under VFR rules, it’s still essential to learn the basics of instrument flying, in case of an emergency. Pilots should also be aware of the weather conditions and be prepared to divert or cancel their flight if the weather becomes too challenging.

Our team has more than 250 years of combined experience in all types of market and economic conditions. Our advisors have some of the highest levels of training and certification, and our firm continues to be recognized by independent third parties for its ability to help clients land safely. Most importantly, we are focused on you and your vision.

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Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Carver Financial Services, Inc., was established in 1990 with the vision of making people’s lives better — clients, team and community. With this mission, Carver Financial Services has grown to be one of the largest independent financial services offices in the country, managing $2.3 billion in assets for clients globally, as of March 2023. You can reach Randy directly at randy.carver@raymondjames.com and in the office at (440) 974-0808.

Once again, we are hearing about the need to increase the debt ceiling and a possible government shutdown. These events are not unprecedented, yet for many, the concepts of the debt ceiling and government shutdowns can be confusing and overwhelming. Shutdowns are not uncommon; the U.S. government has shut down a total of 21 times since Congress introduced the Congressional Budget and Impoundment Control Act, which established the federal budget process in 1976.

The debt ceiling is the maximum amount that the government can legally borrow to meet its financial obligations. If Congress fails to approve a budget or continuing resolution, the government must shut down all but essential services. The relationship between these two events is complex, and their impact on the economy can be significant but not unprecedented. These events will have little effect on investors who are well positioned with a good plan.

Increases to the Debt Ceiling: A Brief History

U.S. debt ceilings date back to 1917, but it wasn’t until 1939 that they were codified into law. With the most recent hike in August of 2022, Congress brought the debt ceiling up to a whopping $22 trillion.

In recent years, raising the debt ceiling has become an increasingly divisive political issue, with both parties using it as a negotiation point. In 2011, the United States came perilously close to defaulting on its debt due to the debt ceiling crisis, which resulted in a sharp decline in the stock market and a downgrading of the country’s credit rating.

In 2013, a disagreement over funding for the Affordable Care Act caused a shutdown that lasted for 16 days. As a result of these developments, there have been further calls for the debt ceiling mechanism to be reformed.

Shutdowns in Government: A Brief History

When Congress fails to enact a budget or continuing resolution, the government temporarily stops providing services that aren’t considered essential. The first shutdown happened in 1976, but they’ve been more common as of late.

There have been a total of 21 government shutdowns, with the most recent in December 2018. The shutdown lasted 35 days, from December 22, 2018, to January 25, 2019. It was the longest shutdown in U.S. history. The cause was a disagreement between Congress and the president over funding for a border wall between the United States and Mexico.

When federal workers and contractors aren’t getting paid because of a shutdown, it can have a negative effect on the economy as a whole — and they may impact consumer confidence and be negative fodder for the media — yet shutdowns have historically had little impact on the stock market.

An LPL Financial study that examined stock market activity over 18 government shutdowns, spanning the period from 1976 to 2013, found that shutdowns have had no impact on performance — the median change in the S&P 500 was 0.0 percent. In fact, LPL’s senior market strategist noted that the S&P 500 has actually gained during each of five previous shutdowns.

Our Team Will Help You Prepare and Benefit from Uncertainty

As with any trending event, it’s important to step back and look at facts versus hype. Your financial plan should anticipate periods of volatility — including a government shutdown and/or debt ceiling — and ensure that you have cash to ride them out. Working with an experienced team can help you minimize stress and make decisions logically versus emotionally. With the proper guidance, you may be able to benefit from uncertainly around a debt ceiling debate and/or government shutdown.

We expect to hear the refrain from the media and pundits who are selling everything from newsletters to doomsday supplies that this time it’s different. It’s not. As stated, there have been 21 government shutdowns and virtually no impact on the stock market.

Our team has more than 250 years of combined experience with all kinds of market and economic conditions, including government shutdowns. We will guide you through whatever comes your way. Uncertainly can present an opportunity to benefit in the long run.

Please reach out if you have questions or concerns about current events or your portfolio or if we can otherwise be of service. Your vision is our priority, and your financial well-being is our passion. We look forward to connecting with you.

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Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Carver Financial Services, Inc., was established in 1990 with the vision of making people’s lives better — clients, team and community. With this mission, Carver Financial Services has grown to be one of the largest independent financial services offices in the country, managing $2.3 billion in assets for clients globally, as of March 2023. You can reach Randy directly at randy.carver@raymondjames.com and in the office at (440) 974-0808.

Between March 8^thand March 12^th, 2023, three large U.S. banks failed, generating a lot of media attention. Many pundits wrote about the pending collapse of the U.S. banking system and dire consequences for the stock markets. Some compared this situation to the 2008 bankruptcy of Lehman Brothers on September 15^th, 2008, and the beginning of the Great Recession.

As they always do, prognosticators are claiming that this time, it’s different — they say that this time, we’re in real trouble. But this time isn’t different. We are not in trouble! The truth is, although the nature of risks and market downturns changes through the years, we can always prevail simply by having a sound financial plan in place, keeping some cash reserves available and staying the course.

You can almost always find opportunity within a crisis.

About the recent bank collapses

To put this in context here is an overview of the three bank collapses that occurred in the second week of March 2023:

• On March 8th, Silvergate, a California-based bank that made loans to cryptocurrency companies, announced that it would cease operations. Silvergate catered largely to cryptocurrency companies, including the failed exchange FTX. The media generally ignored the fact that this was a very niche situation.
• On March 10th, Silicon Valley Bank (SVB) was placed into Federal Deposit Insurance Corp. (FDIC) receivership. After prominent venture capitalists, including those from Peter Thiel’s Funders Fund, told customers to pull their deposits out of the bank, SVB was hit with a wave of requests for cash. By the end of the day on Thursday, March 9^th, depositors withdrew more than $42 billion. This was another unique situation.
• On March 12^th, state regulators closed New York-based Signature Bank, the 16^th-largest lender in the United States. A sudden and unexpected onslaught of customer withdrawals erased more than $100 billion in market value from U.S. banks. The FDIC took control of Signature, which had $110.36 billion in assets and $88.59 billion in deposits at the end of 2022, according to New York state’s Department of Financial Services.

Later on March 12^th, the U.S. Treasury, Federal Reserve and FDIC issued a joint statement saying that all the depositors of Signature Bank and Silicon Valley Bank would be made whole and announced actions to shore up deposits to try to prevent further fallout.

Yet no depositors have lost any funds, and again, Silvergate and Silicon Valley were niche situations and not indicative of the overall banking climate.

Avoid reacting to media reports

As we have said for three decades, the media often offer incomplete information, with a bias toward the negative and short-term aspects. This type of attention can create unnecessary anxiety and drops in markets, which cause many people concern. However, we believe market downturns provide a great opportunity for long-term investors.

We have seen this repeatedly — those who take advantage of dips benefit, while those who panic and/or sell permanently lose wealth. The key to be in a position where you do not need to sell. As always, we recommend having cash reserves and/or fixed income to cover 9 to 12 months of your family’s needs. Currently, there are some relatively high rates available for cash and cash equivalents, with money markets yielding 4.5% or greater!

When the markets take a tumble, it’s not all bad news. Some sectors of the economy actually tend to outperform others as consumer needs shift. These include health care and consumer staples stocks (or funds tracking those sectors), large-cap stocks and income investments.

Market volatility is normal and expected, contrary to media focus. Since 1928, this country has seen a market drop of 5 percent about every 2 months, on average; 10 percent about every 8 months; and 20 percent every 30 months.

Keep in mind that the media will often talk about a “points drop,” not a “percentage drop,” and as the markets move higher, this is more dramatic. For example, in June 2018, the Dow was at 24,000, so a 10 percent swing would be 2,400 points. Today, with the DOW at 32,000, a 10 percent swing is 3,200 points. Given the bank issues this month, the market moved a few hundred points, which is still relatively insignificant.

Have a good plan in place to avoid locking in losses

The key to building wealth is to avoid locking in losses. By having a good plan and good cash reserve you should never have to sell.

Here are some of the biggest news topics from 1981 through 2021:

1981    Beginning of steep recession

1982    Worst recession in 40 years

1983    Market hits new highs

1984    Record federal deficits

1985    Economic growth slows

1986    Dow nears 2000

1987    Record-setting market decline

1988    Iran hostage crisis

1989    October “mini-crash”

1990    Persian Gulf War

1991    Fall of the Berlin Wall

1992    Global recession

1993    Health-care reform

1994    Fed raises interest rates six times

1995    Dow tops 5,000

1996    Dow tops 6,000

1997    Hong Kong reverts to China

1998    Asian Flu outbreak

1999    Y2K scare

2000    Tech bubble bursts

2001    Terrorist attacks on US soil

2002    Corporate accounting scandals

2003    Invasion of Iraq

2004    Rise in interest rates

2005    Gulf hurricanes

2006    North Korean testing of nuclear missiles

2007    The Chinese correction

2008    Beginning of the global financial crisis

2009    U.S. unemployment rate exceeds 10 percent

2010    BP oil spill

2011    The European PIGS debt crisis

2012    Falling off the U.S. fiscal cliff

2013    Boston Marathon bombing

2014    Ebola outbreak in West Africa

2015    The Paris attacks and U.S. mass shootings

2016    Donald Trump or Hillary Clinton

2017    North Korean nuclear testing

2018    Beginning of the US–China trade war

2019    Trump’s quid pro quo impeachment

2020    COVID-19

2021    Border crisis

2022    Russia’s invasion of Ukraine

If someone who turned 65 years old at the end of 2021 had invested $10,000 in the S&P 500 at the age of 25 on January 1, 1981, he or she would have $963,427, despite all the issues with markets, the economy and in the media. During that time, there were a lot of reasons to panic and to avoid investing. Yet those who did invest, and who ignored the negativity and stayed the course, fared well.

From March 1, 2012, to March 1, 2023, the Dow moved from 13,142 to 32,652 — a gain of 148 percent- despite all the issues.

Whether it’s a bank collapse, an international crisis or some other upheaval, you can weather the storm by being prepared and working with your financial advice team on the best strategies to take. Yes, the nature of crises will always vary, but one thing will never change: savvy investors can find opportunity within the upheavals.

We will guide you in taking a disciplined approach

There have always been — and most likely will always be — reasons not to invest and reasons to panic. Yet with a disciplined approach, you can not only manage these situations but benefit from them. While the events change, the ideal reactions are the same, as are the opportunities. We recognize that, although this is simple in theory, it is difficult in practice. That’s why we are here for you.

Our team has more than 250 years of combined experience with all kinds of market and economic conditions. We will guide you through whatever comes our way. Please reach out if you have questions or concerns or if we can otherwise be of service. There are potential pitfalls in building wealth today, yet there are also tremendous opportunities. Your vision is our priority, and your financial well-being is our passion.  We look forward to connecting with you.

Holding investments for the long term does not insure a profitable outcome. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.

Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Carver Financial Services, Inc. was established in 1990 with the vision of making people’s lives better — clients, team and community. With this mission, Carver Financial Services has grown to be one of the largest independent financial services offices in the country, managing $2.2 billion in assets for clients globally, as of December 2022. Randy and his team work with individuals who are in financial transition as a result of divorce, retirement or the sale of a business. You may reach Randy directly at randy.carver@raymondjames.com in the office at (440) 974-0808.