Have you checked your tax withholding lately?

What's the real return on your investments?
 
If you were unpleasantly surprised by the amount of tax you owed or the amount of your tax refund when you filed your 2018 tax return, it may be time to check your withholding.
 
It may also be time if there are changes in your life or financial situation that affect your tax liability. For example, have you recently married, divorced, had a child, purchased a new home, changed jobs, or had a change in the amount of your taxable income not subject to withholding (e.g., capital gains)? Continue reading

Why Not Do It Now? New Research on Procrastination

 
Why Not Do It Now? New Research on Procrastination Do you have a tendency to push off important tasks? Do you do things at the last minute, or maybe not do them at all? If so, you’re not alone. About one in five adults is a chronic procrastinator.1
 

Procrastination can be frustrating in the short term for even the simplest tasks. But it can have far-reaching effects on important activities and decisions such as completing work projects, obtaining medical treatment, and saving for retirement. Recent research offers insights that may be helpful if you or someone you know has a tendency to procrastinate. Continue reading

Should You Invest Internationally?

 
Should You Invest Internationally?Investing in foreign stocks provides access to a world of opportunities outside the United States, which may help boost returns and manage risk in your portfolio. However, it’s important to understand the unique risk/return characteristics of foreign investments before sending a portion of your money overseas.
 

Reasons to go abroad

 

Here are some of the potential benefits of international investing.
 

Additional diversification. Other countries may be at a different stage in the business cycle than the U.S. economy. They could recover more quickly (or more slowly) from a recession.
 

Long-term growth potential. Some of the world’s most rapidly growing economies are located in emerging markets that may be reaping the benefits of new technologies, a growing consumer base, or natural resources that are in high demand.
 

Possible hedge against a weaker dollar. The U.S. dollar has been strong in recent years, but having some investments denominated in foreign currencies may help offset (or even take advantage of) any future dips in its value.
 

Reasons to proceed with caution
 

Here are just some of the potential risks.
 

Politics and economic policies. A nation’s political structure, leadership, and regulations may affect the government’s influence on the economy and the financial markets.
 

Currency exchange. Just as a weak U.S. dollar could work for you, additional strengthening in the dollar could work against you. That’s because any investment gains and principal denominated in a foreign currency may lose value when exchanged back.
 

Financial reporting. Many developing countries do not follow rigorous U.S. accounting standards, which often makes it more difficult to have a true picture of company and industry performance.
 

Risk/return potential
 

Some international investments may offer the chance for greater returns, but as with other investments, stronger potential comes with a greater level of risk. For example, over the past 30 years, foreign stocks have outperformed U.S. stocks, bonds, and cash alternatives 11 times. However, they have also underperformed 11 times, tying cash for the highest number of lowest-performing years during the same time period.
 

Number of highest-performing years, 1989-2018
Cash 4
Bonds 5
U.S. Stocks 10
Foreign stocks 11

 

Number of lowest-performing years, 1989-2018
Cash 11
Bonds 6
U.S. Stocks 2
Foreign stocks 11

 

If you decide to spread some of your investment dollars around the world, be prepared to hold tight during bouts of market volatility. And remember to rebalance your portfolio periodically to help align your asset allocation with your long-term investment strategy.
 

Performance is from January 1, 1989, to December 31, 2018. Cash is represented by the Citigroup 3-month Treasury Bill Index. Bonds are represented by the Citigroup Corporate Bond Composite Index. U.S. stocks are represented by the S&P 500 Composite Price Index. Foreign stocks are represented by the MSCI EAFE Price Index. All indexes are unmanaged, accurate reflections of the performance of the asset classes shown. Returns reflect past performance, which does not indicate future results. Taxes, fees, brokerage commissions, and other expenses are not reflected. Investors cannot invest directly in any index.
 

The principal value of cash alternatives may fluctuate with market conditions. Cash alternatives are subject to liquidity and credit risks. It is possible to lose money with this type of investment. The return and principal value of stocks may fluctuate with market conditions. Shares, when sold, may be worth more or less than their original cost. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest, whereas corporate bonds are not. The principal value of bonds may fluctuate with market conditions. Bonds are subject to inflation, interest rate, and credit risks. Bonds redeemed prior to maturity may be worth more or less than their original cost. Diversification is a strategy used to help manage investment risk; it does not guarantee a profit or protect against investment loss.

Is It Time to Declare Your Financial Independence?

 
Is It Time to Declare Your Financial Independence?No matter how much money you have or which life stage you’re in, becoming financially independent starts with a dream. Your dream might be to finally pay off the mountain of debt you’ve accumulated, or to stop relying on someone else for financial support. Or perhaps your dream is to retire early so you can spend more time with your family, travel the world, or open your own business. Financial independence, however you define it, is freedom from the financial obstacles that are keeping you from living life on your own terms. Continue reading

Inflation Variation, Eroding Purchasing Power

 
Inflation averaged 2.5% for the 30-year period from 1989 to 2018. Although the recent trend is below the long-term average, even moderate inflation can reduce purchasing power and cut into the real return on your investments.
 

Annual rate of inflation, based on change in the Consumer Price Index

 

Inflation Variation, Eroding Purchasing Power
 

Source: U.S. Bureau of Labor Statistics, 2019 (December year-over-year change in CPI-U)

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