In the realm of financial planning, discussions often revolve around market volatility, asset allocation and diversification. While these are undoubtedly critical aspects to consider, there’s one risk that often flies under the radar but can profoundly impact your financial well-being: inflation.

Inflation measures how much more expensive a set of goods and services has become over a certain period, usually a year -the silent erosion of purchasing power over time. As inflation increases, each dollar you own buys a smaller amount of goods and services. It’s a risk that all investors must address in their financial strategy. We believe inflation is the biggest risk most people face regarding their financial future and that of their families.

Inflation is more of a risk than market fluctuations

As a financial advisor, I often encounter clients who are primarily concerned about market risk — the ups and downs of their investment portfolios. While market risk is undoubtedly significant and requires careful attention, it’s essential to recognize that the biggest threat to your financial future may not come from the fluctuations of the stock market, but rather from the relentless march of inflation.

Historically, inflation has averaged around 3 percent per year in the United States. While this might not sound like much, over time, its impact can be substantial.

Consider that when I started working in 1986, the price of a postage stamp was 22 cents. Today a stamp costs 68 cents — more than three times as much. A gallon of milk was $1.08 in 1986, and today a gallon of milk costs $3.95 per gallon — almost four times as much.

The bottom line is that basic goods and services cost three to four times as much today as in 1986. If your money has not grown 300 to 400 percent, you are not keeping up with inflation.

Our primary role for clients is to maintain and enhance their lifestyle while simplifying their lives. To do this, assets must grow faster than, or at least equal to, the rate at which inflation and taxes erode them.

Invest your assets to grow over time

Given the corrosive nature of inflation on your purchasing power, it’s crucial to invest your assets in a way that allows them to grow over time. Simply leaving your money in a CD, savings account or under the mattress may provide safety from market downturns, but it won’t protect you against the effects of inflation.

Investing in assets that have historically outpaced inflation — such as stocks, real estate and certain commodities — can help preserve and grow your wealth over the long term. While these investments come with their own set of risks, they also offer the potential for higher returns that can help you stay ahead of inflation.

While investing in assets that have the potential to outpace inflation is essential, it’s equally important to diversify your investments to mitigate risk. Moreover, the allocation of your investments should be based on your specific needs, objectives and tax situation. For example, someone who is 70 years old and needs income today but is in a high tax bracket is in a very different position than another 70-year-old who doesn’t need income and is in a low tax bracket.

Also consider longevity risk

Another big challenge is that people are living longer and therefore spending money later in life. Called longevity risk, this challenge refers to the chance that life expectancies and actual survival rates exceed expectations or pricing assumptions, resulting in greater-than-anticipated cash-flow needs on the part of insurance companies or pension funds.

We’ve all heard of someone who has lived to be 90 or 100. People often have the mindset of the previous generation and use rules of thumb based on that time period. This can be a problem. To ensure you have enough money to last you through retirement, it’s best to overestimate how long you will live and how much money you will need.

In 1986, life expectancy in the United States was 74.8 years, according to the Centers for Disease Control. In 2024, average life expectancy in this country is 79.25 years, a 0.18 percent increase from 2023.

Yet today, people live into their eighties, nineties or longer. Our planning is based on this possibility. If someone allocates too many funds to expenses that don’t keep up with inflation, they may run out of money. Having your financial advisor design a customized financial plan based on your unique situation can help you manage inflation, longevity risk and other potential challenges.

Effective financial planning can combat the effects of inflation

Effective financial planning is the cornerstone of any strategy to combat the effects of inflation. A comprehensive financial plan should take into account your goals, risk tolerance and time horizon, and your advisor should review and adjust your plan regularly to reflect changes in your life circumstances and market conditions.

Our team will help you develop a personalized financial plan that addresses your unique needs and goals while accounting for the impact of inflation. By working with an advisor, you can gain access to professional expertise and guidance that can help you navigate the complexities of investing and make informed decisions that will protect and grow your wealth over time — regardless of the rate of inflation.

While market risk often dominates the conversation when it comes to financial planning, it’s essential not to overlook the insidious threat of inflation. By understanding the impact of inflation on your purchasing power and taking proactive steps to invest in assets that outpace inflation, you can protect yourself against the erosion of your wealth and build a more secure financial future for yourself and future generations.

Our team is here for you. Please feel free to reach out, without cost or obligation, to discuss your specific situation.

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Any opinions are those of Randy Carver and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

In 2024, for the first time in history, more than 2 billion voters across 50 countries — including the United States, the European Union and India — will head to the polls in a record-breaking number of elections around the world. More than 40 percent of the world’s population and economy will hit the polls to elect national leaders.

These political milestones can send ripples through the stock markets, shaping investor sentiment, economic policies and market direction. With a properly designed and executed plan, this should not impact you.

Market timing vs. time in and out of the market

We get calls from people asking if they should move out of investments and markets before an election. The simple answer is no — if you have a broadly diversified portfolio. Moving in and out of the market is “market timing,” and this has been shown to hurt investors in the long run.

However, “time in and out of the market” is an important strategy to follow. Investors who pull out of the stock market during a downturn typically lose money. Investing is a long-term venture, so the wisest option is always to stay the course.

For example, consider the hypothetical scenario of investing $10,000 in the S&P 500 index over a 20-year period, from January 1, 1999, to December 31, 2018. According to data from J. P. Morgan, if you had remained fully invested throughout the entire period, your investment would have grown to approximately $48,000. However, if you missed the 10 best days (out of 20 years), your ending balance would have been cut in half.

Our investment process uses current dividends and income to support current cash needs, along with holding cash for any anticipated expenses and emergencies. By doing so, the short-term fluctuations of a portfolio don’t matter. We allocate in broadly diversified asset classes and take a proactive approach to monitoring and rebalancing your portfolio.

The reaction of stock markets to elections is a nuanced interplay of anticipation, uncertainty and interpretation. While the overarching sentiment often hinges on the perceived impact of election outcomes on economic policies and regulatory environments, the market response can vary widely based on factors such as political stability, policy continuity and the broader global economic landscape.

Examining historical data unveils intriguing patterns regarding the relationship between elections and stock markets. While it’s tempting to draw broad conclusions, each election cycle is unique, shaped by a myriad of factors, including prevailing economic conditions, geopolitical tensions and public perception. As always, past performance does not indicate future results. Moreover, as mentioned, our investment process, and our clients’ success, is not dependent on market behavior.

3 Ways in Which Elections Impact the Stock Market

The following are three types of dynamics that impact the stock market before, during and after an election.

1. Pre-election jitters: According to Forbes, the year leading up to an election typically shows lower returns as investors cope with However, in the 12 months after an election, the market’s performance tends to be stronger than usual, regardless of which party is in office.
2. Election day swings: Election Day frequently witnesses sharp market movements, reflecting the immediate reaction to election results and the market’s assessment of the incoming leadership’s economic agenda. On election day, the S&P 500 often witnesses significant movements in response to the election results.
3. From 1970 to 2022, the S&P 500 moved an average of 0.32% on the days when elections were held, usually in the first week of November, according to Dow Jones Market Data. Sixty percent of the time, the index was up. That might not seem like much, but the S&P 500’s average daily change for all trading days between 1970 and 2022 was just 0.03%. That means stocks are 10 times more volatile on election days than nonelection days.
4. Post-election resilience or turbulence: Once the dust settles, markets tend to exhibit either relief rallies or prolonged volatility, depending on the perceived alignment between the new government’s policies and market expectations. Smooth transitions and policy continuity typically reassure investors, fostering market stability and confidence.

Data show that if a new party is elected to the presidency, the stock market’s returns average 5 percent. When the same president is re-elected or the party retains the presidency, returns are slightly higher, averaging 6.5 percent.

Markets can assimilate bad news, but they do not like uncertainty. Once the outcome of an election is known, markets tend to stabilize. Another reason not to try to time the market!

Keep in mind that historical data also suggest that economic and inflation trends tend to have a stronger, more consistent relationship with market returns than election outcomes, And regardless of the patterns evident in historical data, each election year has the potential to result in new shifts in the stock market. Past results do not guarantee future stock performance.

We expect continued and increased volatility in 2024 as elections approach worldwide. We believe this can provide an opportunity for savvy investors.

Navigating the Storm: Investment Strategies

In the face of election-induced, or any other, market volatility, prudent investors adopt strategies to mitigate risks and capitalize on opportunities. Here are three strategies that can help you mitigate any shifts:

1. Keep cash on hand: Have enough cash for short-term
2. Diversify: Maintain a diversified portfolio across asset
3. Maintain a long-term perspective: Focus on long-term investment goals and objectives and ignore short term volatility.
4. Work with a team of advisors who can provide both expert guidance and perspective to help address your concerns and questions: Vanguard, one of the world’s largest investment management companies, conducted a groundbreaking study titled “Advisor’s Alpha.” The study aimed to quantify the value that financial advisors bring to their clients, beyond just investment

Vanguard found that, on average, financial advisors can add about 3 percent in net returns for their clients annually through various means such as behavioral coaching, asset allocation, cost-effective investment selection and tax-efficiency strategies.

In the ever-changing landscape of investing, the temptation to time the market will always be present. However, history and statistical evidence consistently demonstrate that market timing is a flawed strategy that can erode long-term investment returns.

Instead, you are better served by embracing patience, discipline and a steadfast commitment to your long-term financial objectives. This strategy is the foundation of our proprietary Personal Vision Planning^® process.

In the United States, we will no doubt hear that this is the most important election in history, and the media will focus on negative, dramatic and often frightening rhetoric. Markets can handle bad news, but they do not like uncertainty. As a result, we expect continued volatility and believe this will present both a risk and an opportunity.

Our firm has navigated elections and uncertainty for more than 34 years, and our team has more than 250 years of combined experience. The team at Carver Financial Services is available to discuss your personal goals and address any questions or concerns, without cost or obligation.

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Any opinions are those of Randy Carver and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. 

Studies Show Higher Net Returns When You Work with a Financial Advisor

In the complex and ever-evolving world of personal finance, the guidance of a knowledgeable financial advisor can be invaluable. While some people may question the need for professional assistance, numerous studies have consistently shown that individuals who work with financial advisors tend to achieve higher net returns compared to those who go it alone.

Often, it’s not about investment selection or portfolios; it is about having an advisor design, implement and execute a personal financial plan for you. A qualified advisor can help you minimize taxes and avoid mistakes.

In this blog post, we explore the findings of three prominent studies that underscore the tangible benefits of partnering with a financial advisor.

Study 1: Vanguard’s “Advisor Alpha^®”

Vanguard, one of the world’s largest investment management companies, conducted a groundbreaking study titled “Advisor’s Alpha^®.” The study aimed to quantify the value that financial advisors bring to their clients beyond just investment management.

The study explains how financial advisors can add value, or alpha, through relationship-based services such as financial planning, discipline and guidance, rather than by trying to outperform the market.

For example, one way advisors provide value to clients is by encouraging them to follow their customized financial plans and “staying the course” instead of making emotional knee-jerk reactions when the markets fluctuate.

Vanguard found that, on average, financial advisors can add about 3 percent in net returns for their clients annually through various means such as behavioral coaching, asset allocation, cost-effective investment selection and tax efficiency strategies. This is just an estimation; the actual amount of value that advisors add to their clients’ portfolios may vary significantly, depending on the circumstances.

Study 2: Russell Investments’ “Value of an Advisor”

In 2013, Russell Investments conducted a comprehensive study titled “Value of an Advisor” to assess the impact of financial advisors on investment outcomes. The study analyzed 25 years of historical data and concluded that individuals who worked with financial advisors accumulated, on average, 1.5 percent more in assets over that period compared to those who did not seek professional advice.

This outperformance was attributed to factors such as goal setting, financial planning, investment selection, and ongoing guidance during market fluctuations.

Russell Investments conducted the study again 10 years later, in 2023, and summarized the value of financial advisors. The 2023 Value of an Advisor formula is A + B + C + T. Those letters stand for active rebalancing of investment portfolios, behavioral coaching, customized experience and family wealth planning, and tax-smart planning and investing — the four components of financial guidance that Russell concludes are most valuable to investors.

Study 3: Morningstar’s “Alpha, Beta, and Now…Gamma”

Morningstar, a leading provider of investment research, introduced the concept of “Gamma” to quantify the value of financial planning and advice.

In its study titled “Alpha, Beta, and Now…Gamma,” Morningstar identified various areas where financial advisors add value, including asset allocation, tax-efficient withdrawal strategies in retirement and behavioral coaching to prevent investors from making emotionally driven decisions during market downturns.

The study’s authors defined alpha as “the residual or skill component — a zero sum game in the aggregate (after fees)”; beta as “the market/asset allocation exposures of a portfolio — equity allocation of the portfolio and underlying asset class exposures”; and gamma as “the additional value achieved from making more intelligent financial planning decisions — a non-zero-sum game.”

This older study, published in 2013, suggested that effective financial planning and advice can lead to additional retirement income of up to 1.59 percent per year.

Why Do Advisors Add Value?

The findings of these studies highlight several key reasons why working with a financial advisor can lead to higher net returns:

• Behavioral coaching: Financial advisors help clients stay disciplined and avoid making emotional decisions that can undermine their long-term financial goals, especially during periods of market volatility.
• Asset allocation: Advisors assist clients in constructing well-diversified portfolios tailored to their risk tolerance, time horizon and financial objectives, optimizing returns while managing risk.
• Tax efficiency: Advisors employ tax-efficient investment strategies to minimize the impact of taxes on investment returns, maximizing after-tax wealth accumulation over time.
• Financial planning: Advisors provide comprehensive financial planning services, including retirement planning, estate planning, insurance analysis and education planning, ensuring that you have a road map for achieving your financial aspirations.

Conclusion: Partnering for Success

The evidence is clear: working with a financial advisor can significantly enhance your financial outcomes and lead to higher net returns over the long term. By leveraging their expertise, guidance and holistic approach to financial planning, advisors help you navigate the complexities of the financial markets, stay focused on your goals and ultimately achieve greater financial confidence.

At Carver Financial Services, we use our proprietary Personal Vision Planning^® process to guide you toward financial well-being over the long term. This all-encompassing, four-step approach ensures we lay the groundwork for a strong and successful investment strategy.

While other firms focus on investments and the markets, we focus on guiding you toward your personal vision of your best future. This process is a partnership with you. Our team will help you define the goals that are important to you, develop and help you implement a plan, and then monitor your progress and adjust your plan as needed over time. We will guide you to achieve your goals in a manner that is consistent with your risk tolerance, needs and vision.

When it comes to planning your financial future, we believe the value of professional advice cannot be overstated.

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Any opinions are those of Randy Carver and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The results in the studies described are hypothetical in nature and not actual investment results or guarantees of future results. 

 

Conventional financial planning has historically prioritized monetary considerations such as savings, investments, and retirement accounts. However, given the increasingly complex world we live in, a paradigm shift toward holistic planning is now becoming far more common.

Holistic planning expands its scope beyond the financial aspects of your life to encompass your physical, mental, and emotional well-being, as well as your personal values, aspirations and overall life satisfaction. At Carver Financial Services, we refer to this as Personal Vision Planning^®, a process we pioneered and have refined over the past 30 years.

We combine the latest technology with our team’s extensive experience to provide you with the optimum guidance toward your most comprehensive and fulfilling future.

Understanding Holistic Planning

When it comes to financial planning, many people — both advisors and clients alike — focus only on the numbers. Of course, the numbers, such as the amount of money you will need in retirement, are a critical part of any financial plan, but we must consider the physical, mental, and emotional aspects of your plan to guide you toward your personal vision most effectively.

Here are six valuable components of any high-quality holistic plan.

1. Comprehensive financial well-being: While financial stability is undeniably pivotal, holistic planning acknowledges it as just one element intertwined with various facets of Our team at Carver Financial Services is dedicated to assisting clients not only in financial matters but also connect you with appropriate professionals to help in areas such as vacation planning and medical referrals.
2. Physical and mental health: A holistic plan recognizes the significance of physical and mental This is a critical element because healthier individuals lead higher- quality lives and incur fewer health-care expenses, which contributes positively to their financial resilience.
3. Lifestyle and aspirations: Holistic planning prompts individuals to identify and prioritize their values and aspirations, ensuring life is purposeful beyond wealth accumulation. This includes passing on a legacy that incorporates an understanding of one’s values and priorities.
4. Family and relationships: Recognizing the impact that personal relationships have on overall well-being, holistic planning incorporates considerations for family dynamics, social connections and the nurturing of meaningful relationships. We provide support in facilitating family meetings, communication, and legacy planning.
5. Emotional well-being and stress management: Holistic planning addresses money-related stress by incorporating strategies for stress management, emotional well-being and resilience-building, acknowledging overall well-being as an asset.
6. Continual adaptation: Acknowledging life’s dynamic nature, holistic planning is inherently adaptable, featuring ongoing adjustments to accommodate shifts in goals, values and external Our team regularly meets with clients to discuss changes and remains available to address questions and concerns. It’s important that your financial planning is dynamic and not a one-time event.

Benefits of Holistic Planning

Here are three significant benefits of holistic financial planning.

1. Enhanced life satisfaction: A holistic approach to financial planning helps to align your financial decisions with your personal values and life goals, contributing to a greater sense of purpose and fulfillment, ultimately enhancing overall life satisfaction.
2. Reduced stress and anxiety: By addressing financial, emotional and physical well- being, holistic planning can alleviate stress and anxiety associated with uncertainty about the future.
3. Improved decision making: Holistic planning fosters self-awareness and a deeper understanding of personal values, facilitating informed and purpose-driven decision making and promoting a sense of control and empowerment.

When you know what you’re striving for and you have an all-encompassing plan to guide you toward that vision, you can live with intention.

By adopting a well-thought-out strategy based on personal goals and vision with professional guidance, you can position yourself to enjoy a fulfilling life without the fear of running out of money. Over the past 30 years, we have developed and refined our Personal Vision Planning process that is based on you and your vision holistically.

The team at Carver Financial Services is available to discuss personal goals and vision without cost or obligation. We provide holistic planning that extends beyond wealth management to address all aspects of life.

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Any opinions are those of Randy Carver and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.