There is certainly no shortage of developments competing for investors' attention these days. Between the midterm elections, uncertainty surrounding interest rates, growing concerns about government debt, and the enormous investments being made in artificial intelligence (AI), financial markets have plenty to digest.

With so many moving parts, it's understandable that investors might wonder what all of this means for their portfolios and long-term financial plans.

Recent market commentary from Charles Schwab offers a fairly balanced perspective. While there are legitimate economic and investment risks worth watching, there are also encouraging developments that may be getting overlooked amid the headlines.

Rather than trying to predict where markets are headed next, let's explore several important themes and what they might mean for long-term investors.

Elections Matter, But Economic Fundamentals Matter More

Election results often generate strong emotional reactions, particularly when the country is politically divided. Investors naturally wonder whether a change in political leadership will help or hurt the economy and financial markets.

Historically, the stock market has performed surprisingly well following midterm elections. According to Schwab, the S&P 500 has generated positive returns during the six months following every midterm election since 1974, averaging approximately 12%.

While encouraging, these historical results should not be interpreted as a forecast.

Schwab's strategists emphasized that today's economic environment presents challenges extending well beyond politics. Inflation, interest rates, corporate profitability, and growing federal debt are likely to have a greater influence on markets over time than which party controls Congress.

One particular concern is the government's ability to address persistent budget deficits. Rising federal debt can put upward pressure on borrowing costs, potentially affecting everything from mortgage rates to business investment. Another debt ceiling confrontation in 2027 could also create uncertainty.

The important distinction is between political developments that generate headlines and economic policies that ultimately affect corporate earnings, consumer spending, and investment returns.

Putting It in Perspective: Making investment decisions based on election outcomes is rarely productive. A diversified portfolio should be designed to withstand a variety of political and economic environments rather than depend on a particular party's policies.

Artificial Intelligence: Innovation Comes With Investment Risk

Artificial intelligence continues to be one of the most influential forces shaping financial markets. Its potential to improve productivity, reduce costs, and transform entire industries is substantial.

However, Schwab's strategists raised an important question: Will the enormous amounts being invested in AI eventually produce enough profits to justify the spending?

Major technology companies are committing hundreds of billions of dollars to data centers, computing equipment, and supporting infrastructure. Increasingly, some are relying on borrowing or issuing additional shares to finance these investments.

That introduces an important financial consideration. Companies are spending enormous sums today in anticipation of profits that may not materialize for several years. Meanwhile, AI technology is advancing so quickly that the competitive landscape could change dramatically before those investments pay off.

There are also practical constraints. Data centers require tremendous amounts of electricity, and concerns about energy costs, water consumption, and infrastructure capacity could delay expansion.

None of this means AI is destined to disappoint. The technology may ultimately deliver substantial economic benefits. However, as with previous technological revolutions, the companies building the infrastructure may not necessarily be the companies that generate the greatest long-term profits.

Putting It in Perspective: Investors can benefit from AI's growth without concentrating their portfolios in a handful of technology companies. Broadly diversified stock mutual funds and ETFs provide exposure to innovation while spreading investment risk across many businesses and industries.

A Broader Stock Market Could Be a Healthier Stock Market

Another encouraging development highlighted by Schwab was the recent improvement in market participation.

For much of the recent market rally, a relatively small group of large technology companies accounted for a disproportionate share of the S&P 500's performance. This created concentration risk, even for investors holding funds designed to track the broader market.

Recently, however, other sectors—including industrials, financial services, energy, and selected healthcare companies—have shown stronger performance.

Schwab noted that approximately 75% of S&P 500 companies had outperformed the index over the preceding month, compared with only 17% a few weeks earlier.

This is significant because a market supported by a broader range of companies and industries is generally less dependent on the fortunes of a few dominant businesses.

It also highlights an important distinction: Owning an S&P 500 index fund does not necessarily mean an investor is equally diversified across all 500 companies. Larger companies carry greater weight in the index, meaning their performance can have an outsized influence on overall returns.

For this reason, diversification across smaller companies, international markets, and different investment styles can complement a portfolio's exposure to large U.S. companies.

Bonds Are Once Again Providing Meaningful Income

For investors approaching or already in retirement, the bond market offers another encouraging development.

According to Schwab, the broad investment-grade U.S. bond market was yielding approximately 5.2% at the time of its November market discussion, near its highest levels in roughly two decades.

This is particularly relevant for retirees who rely on their portfolios to generate income. Higher bond yields can provide more predictable cash flow while potentially reducing the need to sell stocks during market downturns.

However, higher yields do not eliminate investment risk.

Longer-term bonds generally experience greater price fluctuations when interest rates change. Lower-quality corporate bonds may offer higher income, but investors assume additional risk that the issuing company could experience financial difficulties.

Schwab suggested that investors do not necessarily need to extend into very long maturities or lower-quality bonds to earn attractive income.

A diversified portfolio of high-quality bonds with varying maturities can help balance income, stability, and flexibility. Municipal bonds may also be attractive for investors in higher tax brackets because of their potential federal and state income tax advantages.

For retirees, the goal should not simply be to maximize yield, but to generate dependable income while managing risk.

The Bigger Picture: Staying Disciplined in a Changing Market

If there is one consistent message throughout Schwab's market commentary, it's the importance of maintaining investment discipline.

The economy will continue to evolve. Political leadership will change. Interest rates will fluctuate, and technological innovation will create both winners and losers.

None of these developments changes the fundamental principles of successful long-term investing.

A thoughtful investment strategy should balance growth opportunities with the need for stability, maintain appropriate diversification, and account for when money will be needed.

Periodic portfolio rebalancing is equally important, particularly when certain investments have performed significantly better than others. Rebalancing helps prevent a portfolio from becoming more concentrated or taking greater risk than originally intended.

Ultimately, successful investing is less about predicting the next market movement and more about making sound decisions consistently over time.

Markets will always give us something to worry about. The objective is not to eliminate uncertainty, but to build a financial plan that can accommodate it.

And that remains the foundation of my approach to financial planning: helping clients make thoughtful, informed decisions that keep their investments aligned with the lives they want to lead.

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Source: Charles Schwab Market Talk, November 3, 2026. Market observations and forecasts reflect conditions and opinions at the time of the discussion. Past performance does not guarantee future results.

Disclosure: The information presented is based on sources believed to be reliable and is provided by Attune Financial Planning for general educational and informational purposes only. It is not intended as personalized financial, investment, tax, or legal advice. Please consult with your financial, tax, or estate planning professional regarding your individual circumstances before making financial decisions.

These benefits can create substantial wealth, particularly when a company performs well. However, they also introduce financial decisions that are often more complicated than they initially appear.

When should you exercise your stock options? Is it better to sell shares immediately or hold them for potentially favorable tax treatment? How much company stock is too much? And perhaps most importantly, how do these decisions fit into your broader financial plan?

Understanding the different forms of equity compensation—and the choices available to you—can help turn a valuable employment benefit into a more effective wealth-building strategy.

First, Understand What You Own

Although the terms are sometimes used interchangeably, stock options, restricted stock units, and employee stock purchase plans are not the same. Each has different rules governing when you receive shares, when taxes become due, and what decisions you can make.

Here is a high-level comparison of the most common arrangements:

The important distinction is that the value of your equity compensation and the amount you ultimately keep after taxes can be very different.

Incentive Stock Options: Potential Tax Benefits With Important Trade-Offs

Incentive Stock Options, or ISOs, are generally available only to employees and can offer favorable federal tax treatment when specific requirements are met.

Suppose you receive 1,000 options allowing you to purchase company stock at $50 per share. Several years later, the stock is trading at $150.

You can exercise your options by purchasing 1,000 shares for $50,000, even though those shares have a market value of $150,000. The difference—$100,000—is commonly called the bargain element.

Unlike nonqualified stock options, exercising ISOs generally does not trigger ordinary income tax under the regular federal income tax system.

To qualify for favorable long-term capital gains treatment, however, you generally must sell the shares more than two years after the grant date and more than one year after exercising the options.

The potential advantage is meaningful. Long-term capital gains rates are generally lower than the highest ordinary income tax rates.

But there is an important complication: the Alternative Minimum Tax (AMT).

The $100,000 bargain element in our example may be included in income for AMT purposes in the year of exercise, even though you haven't sold any shares or received cash proceeds.

This can create an uncomfortable situation: a significant tax liability without the cash necessary to pay it.

There is also investment risk. If the stock declines substantially after exercise, you could face a tax obligation based on a value that no longer exists.

The planning opportunity: Rather than exercising all ISOs at once, consider a multiyear exercise strategy. Exercising smaller amounts over several years may help manage AMT exposure, coordinate with other income, and reduce concentration risk. Any resulting AMT credit may provide future tax benefits, although recovery is subject to limitations.

Nonqualified Stock Options: Simpler Taxes, but Timing Still Matters

Nonqualified Stock Options, or NQSOs, are more common and generally have more straightforward tax treatment.

Using the same example, suppose you exercise 1,000 options at $50 when the stock trades at $150.

The $100,000 difference is generally treated as ordinary compensation income in the year of exercise, subject to applicable income and payroll taxes.

Your tax basis in the shares becomes $150,000—the $50,000 purchase cost plus the $100,000 already recognized as compensation.

If you immediately sell the shares for $150,000, there is generally little or no additional capital gain, before transaction costs.

If you retain the shares, subsequent appreciation or depreciation is treated as a capital gain or loss when the shares are eventually sold. Holding them for more than one year after exercise generally allows any additional appreciation to qualify for long-term capital gains treatment.

The critical point is that the initial $100,000 bargain element has already been taxed as compensation. Holding the shares longer does not convert that amount into capital gains.

For executives and managers, exercising NQSOs often involves balancing three considerations: the potential for future stock appreciation, the tax consequences of exercise, and the desire to diversify.

A cashless exercise, in which shares are immediately sold to cover the exercise price and associated taxes, can be an effective way to access compensation value without committing substantial personal funds.

Restricted Stock Units: Straightforward, but Easy to Mismanage

Restricted Stock Units, or RSUs, have become a popular form of equity compensation, particularly among established public companies.

Unlike stock options, RSUs generally do not require employees to purchase shares. Instead, the company promises to deliver shares after certain conditions are met, typically continued employment over a specified period.

For example, suppose your employer grants 500 RSUs that vest after three years. When the shares vest and are delivered, the stock is trading at $200.

You generally recognize $100,000 of ordinary compensation income, even if you decide to retain every share.

This creates an important distinction: the tax obligation generally arises when the shares are delivered, not when you sell them.

Employers commonly satisfy withholding obligations by retaining a portion of the shares or selling shares on the employee's behalf. However, withholding may be insufficient for highly compensated employees, potentially creating an unexpected tax bill.

Once the shares are delivered, their value generally establishes your tax basis. Future appreciation or depreciation becomes a capital gain or loss when sold.

One useful question to consider is this: If your employer paid you a $100,000 cash bonus today, would you use that money to purchase $100,000 of company stock?

If the answer is no, retaining all your vested RSUs may not be consistent with your investment objectives.

Employee Stock Purchase Plans: An Often-Overlooked Benefit

Employee Stock Purchase Plans, or ESPPs, allow employees to purchase company shares through payroll deductions, frequently at a discount of up to 15%.

Some plans include a particularly attractive feature called a lookback provision, allowing the purchase price to be based on the lower stock price at the beginning or end of an offering period.

For example, suppose your company's stock trades at $100 when the offering period begins and $120 when it ends.

With a 15% discount and lookback provision, you may purchase shares for $85 even though their current market value is $120.

That creates an immediate $35 per-share economic advantage before taxes.

Qualified ESPPs also offer special tax treatment when certain holding periods are satisfied. However, the benefit of holding shares for favorable taxation must be weighed against the possibility of a stock price decline.

For many employees, participating in an ESPP and selling shares relatively soon after purchase can be an attractive strategy. The objective is to capture the available discount while limiting exposure to individual-company risk.

The Bigger Issue: How Much Company Stock Should You Own?

While tax treatment receives considerable attention, investment concentration may be the more consequential financial issue.

Executives and senior managers often have substantial economic exposure to their employers through salary, annual bonuses, retirement benefits, unvested equity compensation, and accumulated company shares.

If the company experiences financial difficulties, several sources of financial security could deteriorate simultaneously.

Consider an executive with a $3 million investment portfolio, including $1.2 million of employer stock. A 40% decline in that stock would reduce the portfolio by $480,000, assuming other holdings remain unchanged.

That same downturn might also threaten future bonuses or employment.

Diversification does not eliminate investment risk, but it reduces dependence on the fortunes of a single company.

For this reason, equity compensation decisions should be evaluated alongside the rest of your portfolio, retirement objectives, liquidity needs, and personal tolerance for risk.

Five Planning Decisions Worth Getting Right

Understanding how your equity compensation works is only the beginning. The real value comes from making informed decisions about when to exercise, sell, and diversify.

1. Know your vesting schedule and expiration dates. Stock options have finite lives, and leaving an employer may substantially shorten the time available to exercise them.

2. Coordinate transactions with your broader tax situation. Exercising options during a year with unusually high compensation, bonuses, or capital gains may produce a different outcome than spreading transactions over multiple years.

3. Evaluate tax savings against market risk. Holding concentrated stock positions solely to obtain favorable capital gains treatment may expose you to losses exceeding the potential tax savings.

4. Review tax withholding and cost basis carefully. Brokerage statements do not always reflect compensation already included in taxable wages. Incorrect cost basis reporting can result in paying taxes twice on the same economic income.

5. Develop a disciplined diversification strategy. Establishing guidelines for selling vested shares or exercising options can help prevent emotional decisions based on short-term stock price movements.

Executives should also consider company trading windows, insider trading restrictions, and whether a properly structured Rule 10b5-1 trading plan might help facilitate systematic diversification.

Bringing It All Together

Equity compensation can be one of the most valuable components of an executive's financial package. But maximizing its value requires more than simply waiting for the company's stock price to rise.

The most effective approach considers taxes, investment risk, cash flow, employment circumstances, and long-term financial objectives together.

A strategy that produces the lowest immediate tax liability is not necessarily the strategy that creates the best long-term financial outcome.

Whether you hold ISOs, NQSOs, RSUs, or participate in an employee stock purchase plan, the goal should be to make deliberate decisions that convert compensation opportunities into lasting financial security.

Ultimately, the objective isn't simply to maximize the value of your company stock. It's to maximize the contribution that equity compensation makes to your overall financial well-being.

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Source: This article draws on concepts presented in Understanding the Tax Impact of Employee Stock Options, an educational presentation by the National Association of Tax Professionals (NATP), together with additional financial planning perspectives from Attune Financial Planning.

Disclosure: This article is provided for general educational and informational purposes and does not constitute individualized financial, investment, tax, or legal advice. Equity compensation rules vary by plan, individual circumstances, and jurisdiction. Consult your financial and tax professionals before implementing a strategy.

“I've been reading a lot about inflation. Are there any additional strategies we should consider to protect ourselves?”

It's a good question—and certainly an understandable concern.

Whether it's groceries, insurance, healthcare, housing, or travel, just about everything seems to cost more these days. Even when inflation slows, prices generally don't return to where they were a few years ago. They simply increase at a slower pace.

Add headlines about government debt, federal deficits, and concerns about the long-term value of the U.S. dollar, and it's natural to wonder whether we should be doing something different with our money.

But before making major changes, it's important to understand that a well-designed financial plan already takes inflation into consideration. In fact, many of the strategies we use in managing investment portfolios are specifically intended to help preserve purchasing power over time.

And protecting yourself from inflation goes well beyond your investments.

Understanding the Real Impact of Inflation

Inflation is simply the gradual increase in the cost of goods and services. As prices rise, each dollar buys a little less than it did before.

For example, something that costs $100 today would cost approximately $134 in ten years if inflation averaged 3% annually. That's a meaningful increase, particularly for someone living on a fixed income or planning for a retirement that could last 25 or 30 years.

This is why inflation matters so much in financial planning. It's not enough for your investments to grow in dollar terms. Ideally, they need to grow enough to help maintain your purchasing power after accounting for inflation and taxes.

The challenge is that we can't predict inflation with certainty. Some years it will be relatively low. Other years, it may rise unexpectedly.

Rather than trying to forecast inflation, I prefer to focus on building financial plans that can adapt to different economic environments.

A Diversified Portfolio Is Your First Line of Defense

One of the most effective long-term strategies for addressing inflation is maintaining a diversified investment portfolio rather than holding too much money in cash.

Stocks are particularly important for long-term growth.

When I talk about investing in stocks, I generally don't mean buying individual company stocks. We primarily use broadly diversified, low-cost mutual funds and exchange-traded funds (ETFs). These investments allow us to own hundreds or even thousands of companies through a single fund.

When you invest in a stock mutual fund or ETF, you're ultimately investing in businesses. Over time, successful companies can increase prices, grow revenues, improve productivity, and generate higher earnings.

That ability to grow is one reason stocks have historically been an important source of long-term protection against inflation.

Of course, stocks don't outperform inflation every year. There will be periods when stock prices decline even as the cost of living continues to rise. But for money that won't be needed for many years, a diversified stock portfolio can provide an important opportunity for growth.

International diversification also plays a role.

We invest in international stock mutual funds and ETFs because we don't want our portfolios to depend entirely on the U.S. economy.

Owning companies outside the United States provides exposure to different economies, industries, and currencies. This can be particularly helpful when investors are concerned about a long-term decline in the value of the U.S. dollar.

International investments carry their own risks, but they provide another layer of diversification.

How Bonds Help Manage Inflation Risk

Bonds serve a different purpose than stocks. They generally provide income, stability, and diversification within a portfolio.

Just as we primarily use mutual funds and ETFs for stocks, we also use bond mutual funds and ETFs to invest across a diversified collection of bonds.

One important type of investment is Treasury Inflation-Protected Securities (TIPS).

TIPS are U.S. Treasury securities whose principal value adjusts with inflation. As measured inflation rises, the principal value increases, helping protect purchasing power.

We may use mutual funds or ETFs that invest in TIPS as part of a diversified bond allocation. It's worth remembering that TIPS funds can still fluctuate in value as interest rates change, so they aren't entirely risk-free.

Another option is Series I Savings Bonds, commonly called I Bonds.  Like TIPS, I Bonds are issued by the U.S. Treasury and are designed to provide inflation protection. Their interest rate includes an inflation component that adjusts every six months.

Unlike TIPS mutual funds and ETFs, I Bonds are generally purchased directly through the Treasury and held as personal savings. They have annual purchase limits, cannot be redeemed during the first 12 months, and carry an interest penalty if redeemed before five years.

For these reasons, I Bonds may be appropriate for a portion of longer-term savings, but they're not necessarily suitable for emergency funds that need to remain immediately accessible.

We also tend to emphasize shorter-term bonds rather than taking excessive interest-rate risk with longer-term bonds. Shorter-term bond funds generally experience smaller price fluctuations when interest rates change and can reinvest maturing bonds at prevailing rates sooner.

Finally, real estate and, in some portfolios, a modest allocation to gold can provide additional diversification. Neither is a guaranteed inflation hedge, but both can behave differently from traditional stock and bond investments under certain economic conditions.

Housing: An Often-Overlooked Inflation Consideration

Protecting yourself from inflation isn't just about investments. Your housing situation can also have a significant impact on your long-term financial security.

If you own a home with a fixed-rate mortgage, you already have a measure of inflation protection.

Your principal and interest payment remains the same even as the cost of living rises. Over time, inflation can make that fixed payment less burdensome in purchasing-power terms.

Of course, other homeownership expenses—including insurance, property taxes, maintenance, and utilities—can still increase.

For renters, particularly those living in high-cost areas such as the San Francisco Bay Area, inflation can present a different challenge.

Unlike homeowners with fixed-rate mortgages, renters may face substantial increases in their monthly housing expenses over time.

That's why it's especially important for renters to incorporate future rent increases into their financial plans. Depending on individual circumstances, negotiating a longer lease, evaluating alternative housing arrangements, or maintaining flexibility about where to live can help manage this risk.

And while purchasing a home may eventually make sense, buying simply because of inflation isn't necessarily the right decision. The costs of ownership, available savings, expected length of stay, and overall financial goals all need to be considered.

Your Spending Is One of the Things You Can Control

Perhaps one of the most overlooked ways to manage inflation is understanding where your money goes.

We can't control inflation, interest rates, or the financial markets. But we generally have more influence over our spending decisions.

Having a realistic budget—or simply a good understanding of your regular expenses—makes it easier to identify where inflation is affecting you most and where you have flexibility to make adjustments.

This doesn't mean eliminating everything you enjoy.

It means being intentional about your spending, periodically reviewing recurring expenses, and making sure your money continues to support the things that matter most to you.

Small changes can add up. Reviewing insurance premiums, subscriptions, utility costs, and other recurring expenses may uncover opportunities to save without meaningfully affecting your lifestyle.

Managing spending can also reduce the need to rely on credit cards or other consumer debt to cover everyday expenses—something that becomes especially important when interest rates are high.

Make Sure Your Cash Is Working for You

Cash deserves attention as well.

We want enough money available for emergencies and expenses over the next several years, but we don't necessarily want large amounts sitting indefinitely in accounts earning very little interest.

High-yield savings accounts, money market funds, Treasury bills, and short-term certificates of deposit (CDs) can all be appropriate choices, depending on when you'll need the money.

The objective isn't necessarily to earn the highest possible return on cash. It's to maintain safety, liquidity, and a reasonable return while avoiding unnecessary loss of purchasing power.

For money that won't be needed for many years, however, holding too much cash can create its own risk: inflation may gradually erode its value.

Should Inflation Change Your Investment Strategy?

This brings us back to the original question.

Should concerns about inflation, government debt, or the declining purchasing power of the dollar cause us to make major changes to our investments?

Generally, I don't believe they should—provided we already have a well-diversified portfolio appropriate for our goals, risk tolerance, and time horizon.

Making major investment changes based on economic forecasts requires getting two decisions right: knowing when to make the change and knowing when to reverse it.

That's much harder than it sounds.

Instead, I prefer portfolios that don't depend on any single economic prediction coming true.

We use diversified stock mutual funds and ETFs for long-term growth, bond funds and ETFs for income and stability, inflation-protected investments where appropriate, international investments for additional diversification, and sufficient cash for near-term needs.

Equally important, we regularly revisit financial plans to account for changes in spending, income, investment performance, and personal circumstances.

The Bottom Line

Inflation is a real concern, particularly for retirees and those approaching retirement. Even relatively modest increases in the cost of living can have a meaningful impact over time.

But responding to inflation doesn't necessarily mean buying gold, making major portfolio changes, or trying to predict the next economic downturn.

Often, the most effective strategies are the ones we've already incorporated into a thoughtful financial plan: diversification, disciplined investing, managing spending, keeping debt under control, and maintaining appropriate cash reserves.

No investment strategy can completely eliminate the effects of inflation. But we can prepare for it.

Good financial planning isn't about predicting exactly what inflation, interest rates, the stock market, or the dollar will do next.

It's about building a financial plan that can adapt and remain resilient through a variety of economic conditions.

If you have questions about inflation or how your financial plan is positioned, I'm always happy to discuss them with you.

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This article is provided by Attune Financial Planning for general educational and informational purposes only. It is not intended as personalized financial, investment, tax, or legal advice. Investment values fluctuate, and no strategy guarantees protection against inflation or investment losses. Please consult with your financial, tax, or estate planning professional regarding your individual circumstances before making financial decisions.

What Are Behavioral Biases?

Have you ever driven on the freeway and notice how everyone is driving crazy while you seemingly are the only sane person on the road?  All the while not noticing that you are also speeding well past the speed limit?  On the other hand, you might think you're a lousy driver but you have never received a traffic violation in your life.  It's the same thing with money.   Some of us think we are great with money but we have a mountain of debt. Others think they will never save enough no matter how much money they have in the bank.   We like to think that for the most part we are acting rationally with our money. But the truth is, we are emotional when it comes to our finances and that can affect our decision-making.

Common emotions that influence how we spend and invest include:

• Fear
• Guilt
• Shame
• Envy
• Hope
• Excitement

In terms of investments, this could lead to decisions that impact our portfolio in the long run. For example, we may choose to “follow the crowd” and blindly invest in cryptocurrency due to fear of missing out.   We know how that turned out.  We might have sold all of our shares of stock when Markets fell in 2020 during Covid but missed out on the eventual Market rebound.  Or as a result of negative financial articles that we've read,  decide that we will keep our money safely in cash because we are worried that this time, the financial markets will melt down.

We all know about eating disorders but there are also spending disorders.    This can be mild or extreme.  Spending disorders occur when we use money to fill an emotional void.  When we are unhappy or upset, buying something new can make us feel better (at least for a little while).  Spending disorders leads to impulsive spending, credit card debt, and in extreme cases bankruptcy.

There are also behavioral biases that limits our ability to spend money and enjoy our lives.  We might have come from a challenging background as children but through luck, perseverance, and hard work have built up a sizable investment nest egg.  However, whether through guilt, shame, or fear, we cannot allow ourselves to spend money and enjoy the fruits of our labor.   We either feel we don't deserve our wealth, are afraid we will lose it, or  ashamed to have money while others do not.

We are not alone in our behavioral biases, and we can take action to change those things that may be impacting our financial situation.

What Not to Do

Although it may be tempting, we should avoid making rash investment decisions based on what we see in the news or hear from friends and family.   In other words, we have to tune out all of the noise around us and stay disciplined.

For example, we may hear that a CEO of a major corporation is stepping down because of a fraud allegation against him. In turn, our first reaction may be to get rid of our stock in that company. When in reality, this may not have any impact on the company’s performance - especially in the long run. Instead of thinking about that company’s stock over the span of years or decades, we made an in-the-moment decision based on short-term changes. Our gut reaction was to protect our assets right now, when in reality we may have actually hurt our chances for greater investment returns in the future.

What Can You Do Instead?

Partner with me, your Financial Advisor

Planning your future spending and managing investments on your own is stressful and can be difficult.  Furthermore if you tend to be dictated by your emotions than staying disciplined can and will be a challenge.     One of the main benefits of working with me, is that we have meaningful money discussions so that you can feel confident that you are making the best financial decision.  I help you think through your money decisions and uncover any behavioral bias that might be influencing your investing or spending decisions.  

Think Long-Term

It is also vital that you think long-term when making decisions, rather than following trends that will not be beneficial to you in the future.  Working together,  we create and implement a financial investment strategy that is built on a sound rational foundation rather than on investment noise and the emotions of the day. 

Know Yourself

"To know thyself is the beginning of wisdom" - Socrates. 

Being self-aware is an important step in avoiding behavioral biases when it comes to investing and spending.  Think about the money challenges that you are currently experiencing.   What behavioral biases do you think can be contributing to these challenges and how can you remove them?

Remind yourself that successful long-term investment results are built on rational decision making without the distraction of emotions.  When making money decisions, ask yourself if you are being rational or irrational?  If you feel you are being irrational, dig deeper to uncover the biases that is causing your irrational behavior.

If you are the type of person who know your emotions can get the better of you, delegate the day to day managing of your investments to a financial advisor like myself.  The removal of emotions is one of the main reasons why people decide to delegate investment management to financial professionals.

Be clear as to what your long term goals are, the financial resources necessary to achieve these goals, and your tolerance for investment risk.  Allow that information to help determine your long term investment and asset allocation strategy.  Doing so should help alleviate some worry regarding your investments and reduce the urge to make choices impulsively.

Acknowledging and controlling your behavioral biases can help you feel confident in your investment decisions and everyday spending choices. Working with  me, your  trusted financial advisor allows an objective third-party to offer educated guidance, direction, and execution - without emotional bias.

Do You Know the Risks?

Investors need to remember that markets can be turbulent and that preparing for potential declines is essential. There can be a strong temptation to pull out of markets when they become volatile. However, instead of acting on this temptation, it may be smarter to adjust your investment approach. By remaining flexible, you might be able to take advantage of opportunities while managing risks.

• Interest rate risk is the potential for investment losses resulting from a change in interest rates. If interest rates rise, for instance, the value of a bond or other fixed-income investment will decline.
• Market risk is the risk that arises from movements in stock prices, interest rates, exchange rates, and commodity prices. Market risk is distinguished from credit risk, which is the risk of loss from the failure of a counterparty to make a promised payment, and from a number of other risks that organizations face, such as breakdowns in their operational procedures. In essence, market risk is the risk arising from changes in the markets to which an organization has exposure.
• Currency risk is sometimes referred to as “exchange rate risk” and arises from the change in the price of one currency in relation to another. Investors or companies that have assets or business operations across national borders are exposed to currency risks that may create unpredictable profits and losses.

A Risky Balance

A variety of factors may cause one to act more cautiously than normal, including ongoing global uncertainties and fears about the overall economy. This can lead to investors flocking to low-risk investments despite misalignment with their goals. Remember, while minimizing risk can feel like a safe move, you could miss out on opportunities as a result.

Another mistake can be creating a portfolio that doesn’t reflect your overall risk tolerance. When building a portfolio, the objective is to take on the amount of risk that aligns with your goals and time horizon. This is often accomplished through a diversified allocation of assets that may help manage your portfolio’s risk. It’s important to remember that asset allocation is an approach to help manage investment risk. It offers no guaranteed protection against investment loss.

Leave Emotion at the Door

When markets swing, emotional decision making can wreak havoc on the most carefully designed investment strategies.

Fear and greed can drive anyone’s financial decisions. Fear can cause us to abandon an investment strategy when the outcome is not what we want, while greed can cause us to chase investment fads and assume too much risk. As you invest, you can support your strategy by attempting to manage these emotion-based decisions.¹

An investment professional may be able to help when emotions enter the decision-making process. When markets decline, they can answer questions, provide reassurance, and show you the opportunities that volatile markets may provide.

What Is the Time Value of Money?

The basic principle of the time value of money is that money is worth more in the present than it is in the future, because money you have now has the potential to earn. This is due largely in part to inflation. If you think about it, $1,000 in 1999 could buy you more than it could 20 years later, in 2019. And having a $1,000 today will theoretically buy you more than having $1,000 five years from now. With that in mind, the time value of money formula can help you determine the present value of the money you have today and how much it could be worth in the future.

With investing, there is a certain amount of risk you should consider as you calculate the time value of money. For example, taking $1,000 and investing it in a company that is expected to earn 5% per year is not guaranteed.  The more risk you take, the more you are compensated for that risk.   In other words, you are accepting the risk of losing money for the chance to beat inflation and increase the future value of your money.

Why Is the Time Value of Money Important?

The time value of money is important because it allows investors to make a more informed decision about what to do with their money. The TVM can help you understand which option may be best based on interest, inflation, risk and return. It can also be used to help you understand how much money to save in an account if you have a certain goal in mind, such as saving $20,000 in five years if the account earns 3 percent compound interest each year. 

The Importance of Compounding Interest

If the basic idea of the TVM is that money is worth more today than it is tomorrow, you’d think it’d be wiser to spend it now rather than save it for later - but we know that isn’t always the case. While inflation works against you, meaning it makes your dollar worth less tomorrow than today, compound interest can work for you to elevate the value of your present dollar tomorrow.

With compounding interest, the amount of money you’re earning interest on grows in each compounding period. For example, if you have $1,000 and it earns 10% compounding interest every year for five years, the compounding period would be one year. What that means is, in the first year you would have earned $100 in interest (10% of $1,000), in that second year you’re actually earning interest on the total amount from the previous compounding period, which would is $1,100 (the original $1,000 plus the $110 in interest earned in year one). By the end of year two, you would have earned $1,210 ($1,100 plus $110 in interest). If you keep going in this manner until the end of year five, your original $1,000 investment would grow to approximately $1,610. If we consider that the highest inflation rate over the last 10 years was three percent, then in this scenario, choosing to invest your present money and allowing it to grow via compounding interest will you with a favorable and profitable outcome versus just keeping your money in an envelope under your mattress.¹

The Time Value of Money Formula

The following make up the components of the TVM:

• PV =  present value
• FV =  future value
• I = rate of growth or interest rate
• N = number of periods (typically measured in years or months)

Using those values, this is the time value of money formula:

FV = PV x (1+I)^N

Or, if you’d like to understand the present value of future earnings, you could use:

PV = FV / (1+I)^N

Better yet, here is a time value of money calculator that you can use to help you calculate the value of your investment over time:  https://www.msn.com/en-us/money/tools/timevalueofmoney

As we mentioned before, these formulas can be used in different circumstances to help investors or savers understand the value of money today in relation to its earning potential in the future. The TVM is an important piece of understanding the affect inflation has on our money and why investing early can help increase the value of your dollar by giving it time to grow and beat inflation rates. 

Step 1: Give Your Goals a “Why”

When it comes to numbers, it can be hard to evoke an emotional response. That’s why it’s important to give your goals a “why” when you can. Placing a reason behind the numbers can be a big motivator in achieving your financial goals. Think about the difference between “I want to pay my student loans off faster” and “I want to pay off my student loans faster so my wife and I can buy a house and start our family.” Remembering why you’re passing up on those concert tickets this month can help make your sacrifices a little easier to make.

Step 2: Make Your Goals Measurable

Ambiguity won’t be your friend as you work to set financial goals. Focus on being as specific as possible instead, your goals should have a measurable and definitive finish line. This will help you track your progress and feel a sense of accomplishment once you achieve your goals. For example, if you have a goal to save money for a down payment on a new car, choose a number. While you may not know exactly what car you want or how much it’ll cost yet, put an estimate to your goal. Instead of saying “I want to save some money and buy a new car next year,” try “I will put $250 in a separate savings account for the next 12 months that will be used as a down payment for a new car.” This provides a clear, definitive goal that you can track month after month.

Step 3: Be Reasonable

You can follow every step in this guide, but if your goal simply isn’t reasonable — you likely won’t attain it. As you look to set a goal, you must evaluate your current financial standings in comparison with your desired financial picture. If you’d like to accumulate a certain amount of wealth by the end of your 30’s, you need to figure out how it can be done. If your current saving and spending habits support this goal, then you’re likely on the right track. But if you’re often spending more than you’re saving, then you may need to either adjust your goal or adjust your current spending habits.

Step 4: Set a Budget

While we mentioned it in step three, evaluating your spending habits is a tip worth repeating. If your spending habits don’t support your goals, you’re likely fighting a losing battle. Create a monthly budget that supports your future financial goals and current needs. A popular budget breakdown is 50/30/20:

• 50 percent on needs (groceries, rent/mortgage, utilities)

• 30 percent on wants (shopping, eating out)

• 20 percent on savings and debt repayment

For example, if your income after tax each month is $4,000, you’d spend $2,000 on necessities like your car payment, electric bill and rent or mortgage, $1,200 on date nights, clothes shopping and weekend trips and $800 would go toward your student loans and savings account. While everyone’s financial circumstances and current needs differ, this ratio can be a great place to start as you look to draft a budget.

Step 5: Balance Short-Term Needs and Long-Term Goals

Money is nothing more than a tool. The reason you set financial goals in the first place isn’t to simply accumulate more money, it’s to accomplish something that’s pertinent to you and your happiness. And while your future happiness is important, it’s crucial to strike a balance between your long-term goals and your needs or wants for today. You shouldn’t be passing on all trips, vacations, home renovations, car buys or celebrations now because you’re saving for retirement 30 years down the line. Yes, your retirement savings is important. But you need to remember to enjoy what you have today as well. And, of course, the same goes for the other way around. Spending all your wealth today could leave you in a tough spot later down the line.

Step 6: Higher Income Doesn’t Equal Success

Are you ever surprised when you hear of celebrities declaring bankruptcy or pro-athletes having to sell their house? It makes sense to think that a higher income level means more wealth and financial success. But whether you make $40,000 or $400,000 a year, it often doesn’t matter how much your income is. Your wealth and the success of your financial goals is dependent, rather, on what you do with it instead. If you make $400,000 a year but spend $500,000 on frivolous expenses, you’re not building wealth or finding financial success. But if you’re making $40,000 and putting a sizeable portion away in savings each year, your wealth is building over time. As you look to set financial goals, remember that it’s not always about how much you have, it’s about what you do it with it that determines your success. 

If you have a financial milestone you’d like to start preparing for, it’s important to begin with a plan. Evaluate your current needs and spending habits to develop a realistic goal and plan of action based on your unique financial picture.

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This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Banking Terms You Should Know

Net Worth

Your net worth is found by subtracting your liabilities (or debts) from your assets. To determine this value, you can add up everything you have of value. This includes investments, money in the bank and the current value of your car and home. Then, you’ll want to subtract any current money owed, including credit card debt, student loans, mortgage balances and any other debts. The remaining amount is your net worth.

Compound interest

Compound interest is the interest you earn on interest. It sounds confusing, but it can be an effective way to gradually increase your wealth over time. When referred to in regards to a banking account, this is interest that is incurred based on the original deposited amount plus its original interest. For example, if you deposit $1,000 into an account with a five percent compounding interest rate, in the first year you’ll have $1,050 (the original $1,000 plus five percent, or $50). As you enter into the next year, that five percent interest rate will apply to the $1,050 (the original amount plus its interest already accrued). By the end of that year, you’ll have $1,102.50.

FICO Score

FICO, which is an acronym for Fair Isaac Corporation, is a method used to determine how credible a borrower may be. This score is typically dependent on factors including total debt owed, length of credit history and previous payment performance. A FICO score can be between 300 and 800. The higher your score, the better a chance, in general, you have at obtaining loans or other forms of financing.

APR

APR stands for annual percentage rate. This refers to the amount of interest gained in an account. It does not include compound interest.

Certificate of Deposit

Often referred to as a CD, this is an account in which you agree to deposit a certain amount of money and leave it in the account for a predetermined length. In doing so, you will receive an interest rate that is typically higher than those found on checking or savings accounts.

Investment Terms To Know

Asset Allocation

When developing your portfolio, asset allocation refers to the process of dividing your assets into different asset classes. The most popular asset classes include stocks, bonds and cash or cash equivalents. Typically, your asset allocation is determined based on several factors including risk tolerance and time horizon.

Capital Gains

This is the amount of value an asset has gained or increased since the original purchase. Capital gains are typically used to describe an increase in value of stocks or real estate. It’s important to note, however, that these gains are only shown on paper until the actual entity is sold.

Rebalancing

Rebalancing is the process used to help maintain the proper asset allocation for your specific needs. This is a necessary part of keeping your asset allocation in check as stocks, bonds and other assets are sold or purchased or gain and lose value over time.

Mutual Funds

When choosing to invest in a mutual fund, you are pooling your money together with other investors into one account that is then typically managed by a professional. These types of investments can include any of the most common asset classes including stocks, bonds, cash and cash equivalents (such as a certificate of deposit).

Custodial Account

In the broadest sense, a custodial account is any account that is managed by another party. Typically, that party will have a fiduciary duty to manage the account in the holder’s best interest. In terms of investment accounts, the manager could be the brokerage firm you’ve put in charge of handling your investments. The term custodial accounts is also used to describe accounts that have been set up by a parent or legal guardian for a minor. 

Insurance Terms To Know

Beneficiary

In the event you were to pass away while owning a life insurance policy, the beneficiary is the person who would receive the insurance payout after your death.

Umbrella Insurance

Umbrella insurance is a type of liability insurance designed to provide blanket coverage protecting most aspects of your financial life. Specifically created to cover you in the case of a lawsuit, this coverage steps in when you’ve reached the liability limits on your auto insurance or other types of insurance. 

Term Life Insurance

Term life insurance is designed to offer coverage only during a designated period of time. When you select the term, you often have the choice to choose the length, such as 10, 20, 30+ years. Should you die unexpectedly or prematurely during this predetermined time span, your beneficiary will receive an insurance payout. 

Premium

This is the actual amount your insurance plan costs you to have. You’ll typically pay your premium on a month to month or annual basis.

Risk Classification

When determining the premium on an insurance policy, the provider will evaluate your risk classification among other factors including the length of the policy, your age, etc. In terms of life insurance, providers will determine your risk classification based on a number of variables including your smoking status, BMI and medical history. 

Whether you’re looking to dive deeper into the world of investments or take a second look at your current insurance policies, it’s important to have a basic understanding of the concepts and terms the professionals you speak with will be using. This can help you make more informed decisions as you move forward in navigating the financial services industry.

Have any more questions about financial terms or looking to plan for your future? I'm here to help. Please feel free to reach out! 

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning in partnership with twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information.

Avoid These 6 Common Investing Pitfalls:

1. trading based on your Emotions

When it comes to investing, the emotions range from optimism - "I really believe that this stock will do well, it's time to buy", elation - "Wow, I can't believe how well this stock is performing - it's time to buy more!", nervousness - "Gosh, the stock is taking a dip - should I sell?", and fear - " I'm taking a loss, it's time to sell now and put my money in cash!"  Relying on these emotions to guide your decision making may lead to poor decisions at the worst possible time.  

2. Failing to FOLLOW a Disciplined Process 

Hunches and tips rarely work out in the long run, but choosing and sticking to a proven investment strategy does.  Following the latest news headlines too closely can adversely influence your view of investing.  Keep in mind, that the more shocking the headlines, the better the news rating but not necessarily better investment decisions.  Without a strong investment philosophy, you may unwittingly follow the advice of friends, neighbors, or family, especially if the “insight” promises a fast, easy return.   But growing wealth has no shortcuts. Success requires a solid investment approach, a long-term perspective, and discipline to stay the course.  

3. Avoiding REBALANCING a Portfolio

Hopefully when you developed your long term investment portfolio, you chose an asset allocation ( mix of cash, bonds, and stock) that was in line with your investment risk tolerance and will provide you with the expected rate of return you require to meet your goals.  Over the course of time, the actual mix will move away from the original asset allocation as one portion of your investment portfolio increases in value while another loses value.  Re-balancing sounds counter -intuitive because it means selling those "winners" and buying the "losers" in order to bring your asset allocation back in line to the original target.  

4. investing in only a few COMPANIES

The old adage, ”Only invest in what you know," is good advice, but if you don't have experience with several types of financial assets, your portfolio probably isn't diverse enough to offer you very much stability.  Diversification avoids exposing you to unnecessary risk of  investment loss.  By holding a globally diverse portfolio, you are then able to capture higher investment returns wherever it occurs.

5. Selling When the Market Gets rough

The market is down for the second week in a row, and the value of your portfolio is dropping with no end in site. Are you going to have the fortitude to stick it out or are you going to get out? If all of your eggs are in one basket than you probably should.  If you are in a globally diversified portfolio and invested for the long-term than the answer is probably no.  Only those people who are relying on stock investments for today's cash needs should be worried about short term drops in prices. Over the long term, markets will go up. You just need the discipline to look beyond today's headlines.

6. Trying to "time" the market

You have heard it a thousand times, "Buy low, sell high," but attempting to time the market by trying to predict the  floor or ceiling price can cause you to drastically reduce your portfolio's rate of return.  The key is to remain diversified and re-balance your portfolio regularly.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information.

Stock Appreciation Rights provides a way for Employers to give key employees incentives to stay with them by providing them an opportunity to participate in and be rewarded for their contribution to the long-term growth of the company.

To illustrate, in acknowledgement of your value and to encourage you to stay with them for the long term, your company gives you 1,000 shares of SAR’s (stock grant) at $10 per share on January 2^nd, 2019.  Your SAR units will vest on January 2, 2022.  Starting on this date, and up until a designated expiration date, you will have the option of exercising your right to the appreciation of your 1,000 shares.   Any SAR shares not exercised after the expiration date will be voided.  

For example, if the market price is $25 and the grant price is $10, the difference is $15.   The potential appreciated value is $15,000 (1,000 shares x $15).   

Depending on our company policy, you could receive the $15,000 as a cash bonus (called a cashless exercise) or you could receive $15,000 worth of company stock.  

If you receive stock, it is important to note that the price of the stock on the date you exercise your SAR’s is the “exercise” price (your cost basis).  The number of shares you actually receive will be the appreciation value divided by your exercise price.  In this case it will be 600 shares ($15,000 / $25)

Now what happens if the price of the stock on the date your stock vests is lower than the grant price?  In this case, your SAR is considered to be “underwater” and you won’t be able to exercise your right.  You would have to wait until the market price goes above the grant price.   

How are SAR’s taxed?

The appreciation value whether it is received in cash or in stock is treated as compensation and is taxed at your ordinary income tax rates.  In our example above, the $15,000 will be added to your total gross income for the year.

Your company will typically withhold a standard amount for Federal and State taxes on your behalf.  Sometimes this is sufficient but depending on your income level, the amount of tax withheld might not be enough especially if you are in a high tax bracket.   In this situation it is not uncommon to owe more taxes at the end of the year.  

Risks of owning SAR shares

An inherent risk of SARs is not properly managing your SAR shares once they are fully vested.  One mistake that can happen is not maximizing compensation potential by waiting to long to exercise (not selling when price of your company stock is high). Second, you wait too long and your SAR’s value becomes negative.  Third, you miss out on your compensation benefit altogether because you lost track of the expiration date of your SARs and they expire before you could take action.   

If you do manage to exercise your SARs and you are given stock compensation, you now have the risk of stock ownership.  An inherent risk of owning shares of stock is the risk of investment losses.   

Holding on to company stock exposes you to the risk of having a “concentrated stock position”. This happens when you hold on to a large amount of your company stock to such a level that it can potentially impact the value of your entire investment portfolio.

If your portfolio becomes concentrated, a dramatic change in your company stock can have an impact on the entire portfolio.  While this might not seem like a big deal if your company stock is rising but if it were to drop in price, your entire portfolio would lose value.  This impact can be significant especially if you are nearing retirement.

A major tax risk of SARs is not considering the tax impact of your additional compensation.  This can happen if your SAR’s value has grown significantly from the time they are granted to you and when they fully vest.  If you have a large amount of SARs shares that are fully vested, you may want to consider exercising your rights over a period of years in order to minimize the tax impact so as to not push your income into a higher marginal tax bracket and / or limit your ability to take advantage of tax credits and deductions.

This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning.  Please consult your financial, legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.

What Are Restricted Stock Units (RSU)?

RSU’s are shares of company stock that is provided to employees over a specific period of time.  For example, let’s say you found a job with a great company and as part of the job offer, they give you 10,000 shares of stock.  This is called a stock grant.  

However, per company policy, you will only receive a quarter of that amount or 2,500 shares each year for the next 4 years.  This is called the vesting period. The stock is restricted because your ownership is limited to only those shares of stock that have fully vested.  If you leave the company before your shares vest, you forfeit your right to receive those remaining shares.  

By giving you the shares in this manner, your company hopes that you will remain there for a long period of time.  In return for your valuable service, you receive all of the stock you were promised.  

You pay taxes twice with RSU’s

The first time you will pay taxes is when you receive your vested stock shares.  Going back to our example, let’s say you have made it to your one-year anniversary.   This means that 25% of your shares have now vested and you receive 2,500 shares.  The date you receive your shares is called the exercise date.  On this day the share price of your company stock is valued at $10 per share – called the exercise price, and you receive stock worth $25,000.    Receiving company stock is considered income and you are responsible for paying taxes on that income.  

Your company will typically withhold a standard amount for Federal and State taxes on your behalf.  Sometimes this is sufficient but depending on your income level, the amount of tax withheld might not be enough especially if you are in a high tax bracket.  In this situation it is not uncommon to owe more taxes at the end of the year.  RSU compensation can be a major source of frustration for people if the tax impact is not planned for carefully.

The second time you are taxed is when you sell your company stock.  When you decide to sell, you will be taxed on any gain you receive.  This gain is the difference between the selling price and your exercise price.  If you sell within one year, the gain is taxed at ordinary income tax rates.  If you well after one year, the gain is taxed at the long-term capital gains tax rate.

Beware of selling for a loss

Once you receive your shares of company stock, it is treated like any other stock that you may own. You can make money but you also have the risk of losing money.  That is why it is important to keep track of your cost basis (exercise price) and sell your stock before it goes below that price.

This point is critical because remember, you paid income tax on the stock that you received.  Therefore, you don’t want to receive less cash than you deserve.  In our example you paid taxes on $25,000 of stock that vested.  Let’s say the tax you paid is $5,000 so you receive $20,000 in stock compensation.   The stock unfortunately loses value and you sell it for $15,000.  As a result, you paid an additional $5,000 “penalty” for holding on to the stock longer than you should have.

Beware of owning too many RSU’s

In addition to experiencing potential investment losses, the other risk for continuing to accumulate and hold on to your company stock is that over time it can grow too large and make up a significant part of your investment portfolio. This is called “a concentrated stock position”.  

When your portfolio becomes concentrated, your portfolio is no longer diversified – investments broadly spread out among different assets.  The benefit of diversification is if one part of your portfolio goes down, another part goes up.  

If your portfolio becomes concentrated, a dramatic change in your company stock can have an impact on the entire portfolio.  While this might not seem like a big deal if your company stock is rising but if it were to drop in price, your entire portfolio would lose value.  This impact can be significant especially if you are nearing retirement.

How to Avoid Risks of Owning RSU’s

Restricted Stock Units can provide you with a great source of additional compensation.  However, RSU’s are trickier to manage than a cash bonus as you have to manage the risks associated with holding stock investments.  

To avoid having to manage the risk of investment losses or having a concentrated position in company stock, a prudent approach would be to sell your RSU’s immediately after it vests.  The sell price and the exercise price will be very close and therefore, the tax impact will be minimal.  In this way, your RSU’s become what is intended to be:  other compensation.  

The cash proceeds can be used to pay additional Federal and State taxes owed, supplement your salary, placed in safe investments like CD’s if you are saving for a house, or invested in a diversified portfolio of stocks and bonds as part of your retirement savings.

This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning.  Please consult your financial, legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.

Advice From the Oracle

Billionaire and real estate magnate Warren Buffet told CNBC in 2016 that buying or selling in a rush may not be the best strategy. “If [worried investors are] trying to buy and sell stocks, and worry when they go down a little bit … and think they should maybe sell them when they go up, they're not going to have very good results." Such a panic move could unbalance your portfolio where you are either taking on more or less risk than you should.

Keep a Balanced Portfolio

A balanced portfolio is a must for surviving a stock market crash. You can re-balance by selling other assets like bonds or even commodities. Then you can invest in stocks that are down in price. It’s not a panic buy; it’s a strategic move that fits your original investment plan by taking your portfolio back to the ratio of stocks to other assets.

Resist Panic Selling

If you sell in a rush to get out of a down market, you could end up missing some big gains when it corrects. A few bullish days in the market can yield a big return; however, you will miss those few days that could make a $20,000 difference over a decade of investment.

Buffet advised to look at the earnings sheet to determine whether you have made a good investment, not the market. You can’t judge your investment strategy all of the sudden; you have to look long-term.

Taking Advantage of tax Laws

Many financial advisors suggest a strategy to create tax losses to offset capital gains by selling an investment. If your gains are less than your losses, you can claim those losses on your tax return. You can carry over losses greater than the amount you can claim on your annual return to another tax year. The strategy is called tax-loss harvesting. A good financial advisor can assist you with developing a strategy that works for you.

Another thing that many financial advisors agree on is to stay calm. Staying in the market during a crash is important for younger investors. Older investors may be worried that the market crash will trash their retirement nest egg.

Protect Your Nest Egg

If you’re really worried about things like a college or retirement fund, you can take steps to protect these funds.

1. Reduce your debt. If you start losing money in the market that threatens to deplete your funds, you don’t want to have to pay creditors while trying to take care of yourself and maintain your accounts.
2. Ask your financial advisor about reducing the amount of risk you have. You’ll at least feel more confident about your portfolio if you know that you’ll have a healthy portfolio that’s relatively immune to fluctuations.
3. Don’t invest money you think you may need. This is especially important for retirees who may only have investment income to rely on as they get older.

Young or old, the best protection may be to consult an experienced financial advisor before making any investment moves. Speaking with a professional can give you peace of mind and sound advice during economic turbulence.

^{This content is developed from sources believed to be providing accurate information.  Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.}

Donor-Advised Fund Basics

A major benefit and why individuals choose to use a DAF is that it allows people to give a portion of investments or property  to charity in order to receive a tax deduction immediately. However, the holder isn't required to decide on their preferred charity at the time of donation. This can be a relief to individuals who have a desire to give to charities but are unsure where to donate.  Instead, the account is managed by a nonprofit institution or an eligible charity organization so the IRS can be assured that the funds are not being mismanaged. This organization will typically charge a small fee to account holders in exchange for suggesting the best investment strategies to grow the assets over time.

How to Use a Donor-Advised Fund

When the assets are in the DAF, the individual holder has the option to choose how conservative or aggressive those funds are invested.  As their investments grow, more assets are available to charitable organizations down the road. Some people will use a DAF instead of setting up some type of trust for a particular organization while others will front-load their account to give themselves enough time to grow their assets. Typically, individuals will set up a DAF during a high-income year in order to avoid paying full taxes on their income while still being able to support a noble cause. Any charity that has been approved by the IRS is eligible to benefit from a DAF.

How to Donate to a Donor-Advised Fund

If you choose to open a DAF, the first step is to choose which provider of DAFs  you want to invest with.  The three major providers are Charles Schwab Charitable, Vanguard Charitable, and Fidelity Charitable.  Each one will have their own fees and restrictions for holding onto the funds. Account holders can then store away part of their assets into the DAF. This can be anything from cash to private stocks to real estate to bonds. You are then eligible for the tax deduction as soon as the assets are promised to an approved charitable organization. The funds inside this account are entirely tax-free, which means they can grow without interference from the IRS.

Using Your Discretion

Charities ebb and flow throughout the year, changing strategies, leadership, and even focuses. Those who own DAF are allowed to observe these changes as a means of having control over which causes the support. But DAF holders are not technically required to donate the funds to a charitable organization at all. Holders may choose DAF over trusts because there are fewer limitations to a DAF. Ultimately, there are more freedoms for account holders to manipulate their assets within a DAF.

Donor-Advised Fund Tax Information

Any contributions made to a DAF are classified as a 501(c)(3) gift. The IRS allows the individual to give up to 50% of their Adjusted Gross Income in cash and up to 30% in other types of assets.¹ Liquid gifts such as cash are taken at market value, but illiquid investments will need to be evaluated by an independent appraiser for the exact monetary value. Individuals who want to exercise specific investment strategies will need to check with the organization managing their account. Each one will have their own list of approved means of growing the funds.

Is a Donor-Advised Fund Right For You?

There is a lot to consider when it comes to getting the most out of DAF. However, it may be a good choice for individuals who have highly appreciated assets, are in a high income bracket have a desire to receive immediate charitable donation deduction, but may not be ready to give to specific charitable organization(s) right away.

^{1 https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions}

_{This content is developed from sources believed to be providing accurate information.  It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.}

Income and Deductibles 

More and more employers are now offering High Deductible Health Plans (HDHP). In exchange for having to pay a higher deductible amount, you will pay a lower premium.  Lower premium payments means higher take-home pay.  To offset the cost of the high deductibles, the Health Savings Account (HSA) was established so people enrolled in HDHP's would have an efficient way to save for future deductibles.  For example, if you made  $30,000 a year after taxes and had medical expenses that equaled your deductible of $6,000 deductible, then you would be giving up a full 20% of your income in medical expenses.

Reducing Your Taxable Income 

Making tax deductible contributions into your HSA reduces your taxes and increases the amount of taxable income you make a year. It helps you maximize your income while simultaneously safeguarding against emergency health situations. Individuals who contribute $2,000 to their HSA a year will be taxed as though they make $2,000 less than their standard income. The money you contribute to your HSA will roll over from year to year, which means the insured can grow their emergency funds over time. While these funds typically can't be used to pay for insurance premiums, they can be used to pay for co-pays, deductibles, and other eligible non-covered medical expenses. 

Maximum Restrictions 

The government has placed restrictions on how much a person can contribute to their HSA based on their age and marital status, and these restrictions change every year. For individuals, the current maximum is $3,400 and $6,850 for a family.¹ Adults over the age of 55 are allowed to contribute an extra $1,000 or more. If you choose to open an HSA, you must make contributions in cash as opposed to other types of property, including stocks or bonds. Employers and family are allowed to contribute to an HSA on behalf of the individual. The contribution limits for employers generally change every year as well. 

How to Use It 

Some people use their HSA as a straight savings account while others may choose to invest the money in mutual funds or stocks. In fact, some financial experts view the HSA as a better financial move than investing in a typical retirement account. When it comes to an IRA, individuals are required to withdraw from the account once they reach the age of 70 1/2, but an HSA allows people to continue contributing to it tax-free with no such requirement. The income deposited is also not subject to the FICA tax that goes toward social security and Medicare, while an IRA would be subject to the additional tax. 

Withdrawals that you make for medical expenses regardless of your age are tax and penalty free. HSAs can also allowed to be used for non-medical expenses, though they will be taxed as income and will be subject to a tax penalty prior to the age of 65. However, after the age of 65, funds can be withdrawn from your HSA for non-medical expenses without penalty but it will be taxed as income.

HSAs are commonly offered by health insurance companies, so an you can sign up for the account simultaneously when signing up for a HDHP.  If you are not happy with your employer's HSA provider, it's possible to open a separate account at another financial institution that offers HSA's.   The choice of the right HSA often comes down to fees, investment choices, and convenience.

If you are healthy and do not see the doctor often, enrolling in your company's High Deductible Health Plan will save you money because it will lower your monthly premium.  (If you expect to see your doctor often, then a higher premium and lower deductible health plan might make more sense for you and your family). 

You can then enroll in an Health Savings Account and make tax deductible contributions.  If you do not need the money for medical expenses, the money can grow over time and you can potentially have a sizable investment in 10, 15, or 20 years.  The funds can then be used to fund future medical expenses tax-free.  If you are fortunate enough to be in good health then after the age of 65, the money in the HSA can further be used to help finance your retirement goals.

^{1 https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-lowers-2018-family-hsa-contribution-limit.aspx}

  _{The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.}

Clear Yourself of Debt

Depending on the size of your inheritance, there may be no excuse for continuing to carry large amounts of consumer debt that charge high interest rates. If you have such debt, you may want to start by looking at how best to approach paying it down. You can pay off credit card balances, car notes, and student loans with your newfound wealth. A good idea regardless is to go through your options with a financial planner and discuss how best to handle using your inheritance to pay off your debt.

Take Care of Family

Your immediate family may not have needs right away. However, you should start to think about the future, especially if you have children. Factor an inheritance for your loved ones into your regular savings goals.    If you have children, placing some of your inheritance in a 529 Plan for you kids may be on your list of savings priority. 

Invest

You are likely (hopefully!) already thinking of savings, Roth IRAs and other investment strategies upon receiving an inheritance. You can also invest in other ways, like purchasing a new home or rental property. Of course, you'll want to balance any investments with debt reduction as well. 

Boost a Worthy Charity 

If you are knowledgeable about finances, you know of the tax benefits of charitable donations. Giving to a charity may help reduce some taxes owed thanks to your new capital gains. You will also be contributing to your community or an organization in ways you could not before. You may establish a trust that will help fund a charitable organization for years to come. As a nice touch, you could establish the trust in the name of the family member that passed on.

You don’t have to limit the gift-giving to a charity. You can spread the wealth among family and friends. Gifts have tax implications like charitable donations, so it’s something you will want to talk about with a financial planner.

Take Great Care

Many people joke about spending their paychecks before they receive them. That may be the case for you and your inheritance, especially if it is something you have been anticipating. Resist the urge to splurge or spend your new found gain too rashly. You may have relatives, friends, or even strangers approaching you with business opportunities that can’t miss, or asking for your help financially. Think hard and do your homework before rushing into anything.

Talk Things Over

You shouldn’t make these big decisions alone if you hope to pay forward the legacy you received. Of course, you can talk things over with family members, though finances can be a difficult topic. You can speak with the executor of the will or  trustee of the trust if that’s how you received the inheritance.  You can address these issues with an attorney  who is well versed in finances, taxes and investments.

It may be a good time to establish a relationship with a financial planner if you don’t already have one. It may not have made sense to have a financial planner previously, but now that you have a new source of funds, talking to an experienced professional will be a good idea and save you from potential heart ache down the road.

 _{The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information only.}

What Is Cryptocurrency?

In simple terms, cryptocurrency is electronic money created and verified using technology, while hiding the identities of those involved in the transactions. The term cryptocurrency is made up of two parts: crypto and currency. Crypto, short for ‘cryptography,' is the computer technology used for encryption to help hide information and identities, as well as provide security for this digital cash. Currency, on the other hand, is simply a monetary token (something that carries some monetary value and can be used for the exchange of goods and services).

Cryptocurrencies are designed to be more reliable, cheaper, and faster to use as compared to government-issued currencies. With cryptocurrencies, you don’t have to rely on the government to create and distribute your money while banks store, send, and receive it. All these duties are transferred into your hands. You can easily use your cryptocurrencies to quickly transact with others both online and offline, and you are also able to store your money by yourself (using hot or cold wallets). Sending money directly without involving a middleman (mostly banks) makes transactions fast and very affordable.

To make the process efficient and help thwart fraud or manipulations, all cryptocurrency users can simultaneously record, view, and verify their own transactions, as well as those of other users. The digital transaction recordings are made in a “ledger” that is publicly available for anyone to view. In fact, the ledger is not located in one place. Its copies are with all the participants engaged in the distributed network. The public ledger helps transactions become transparent, secure, efficient, and permanent, hence there is little chance of manipulation.

Cryptocurrencies don’t require you to trust a bank to hold your money. Provided you have a secure wallet for the storage of your cryptocurrencies, your money is safe in your hands at all times. You also don’t need to trust the person you are transacting with online because you can actually see the money being transferred, received, verified, and recorded by hundreds, if not thousands of people.

Salient Transactional Properties of Cryptocurrencies

1. Irreversible

Cryptocurrency transactions are irreversible once you hit the confirmation button. No one can help you recover your funds if you send them to the wrong address. So, be extra careful!

2. Pseudonymous

Accounts and transactions cannot be connected to real-world entities. Identities of all parties involved are anonymous.

3. Fast

Cryptocurrency transactions are fast and can be carried out anywhere in the world. Confirmation takes only a couple of minutes.

4. Secure

The public key cryptography system used in protecting your funds is ultimately secure. Addresses used to send and receive cryptos are more secure than most other systems.

5. Accessible to anyone

You need no permission from anyone to use cryptocurrencies. Just create a wallet, mine, or buy some cryptocurrencies online, and you are good to go. You can spend it there and then, or you can store it safely for future use.

Brief History of Cryptocurrencies

The idea of having some mathematically secure chain blocks was brought up back in 1991. However, it was only conceptualized as a digital currency between 1998 and 2005 by Nick Szabo as “Bit Gold.” In 2009, an anonymous person/group known as Satoshi Nakamoto created the first decentralized digital currency known as Bitcoin, which became the most commonly known and used cryptocurrency in the world.¹

As of today, there are over 1,400 alternative coins to Bitcoin, commonly referred to as altcoins, and there are many more entering the space every year. Ethereum, Litecoin, and Ripple are the top alternatives to Bitcoin in terms of market capitalization. 

Blockchain

This is one common term you will hear in the cryptocurrency world. A blockchain is the technology used to create permanent and secure digital recordings that are not managed by a single person or group. It can be used to store any type of information, including medical records and computer information, but the first blockchain was used to record Bitcoin transactions. Imagine the blockchain as a book of records, where each page in that book is a block that can record anything. The blocks are created simultaneously, hence creating a chain of blocks known as the blockchain.

Mining

Another common jargon term in this space is mining, which refers to the process of registering transactions on the blockchain. This requires computer work, and therefore, any computer that completes this process gets rewarded with some cryptocurrency. Mining is how many new cryptocurrencies are made, but considering that it’s a fairly complicated process, many people choose to buy preexisting currencies.

The world of cryptocurrencies is growing fast and wild. There are many emerging cryptocurrencies that have the potential to disrupt the future, while others seemed doomed to fail. Some investors have become extremely wealthy by investing early in worthy projects, while others have lost their money, so it's important to tread carefully in this space.

^{1 http://nakamotoinstitute.org/}

_{This content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.}

We’ve all heard the same advice again and again – an investor’s portfolio should be diversified and mixed so that if something goes down in one area of the market, you don't lose your shirt with every egg in one basket. The problem, however, is that the idea of diversification is not always well-explained or understood. So instead of really diversifying, some investors just create a portfolio of stocks. They believe they are diversified with stocks in a food company, a tech business, an oil company and a pharmaceutical, but in reality all of their investment is still in one location: a public stock market.

What is 'Diversification?'

True diversification is a risk management technique that mixes a wide variety of investment types within a portfolio. You combine different investment types together so they are truly offsetting each other with the primary goal of both protecting value and growing worth. That may mean utilizing all possible areas of investment that are viable for the investor. These may include, but are not limited to, cash, certificate of deposits, real estate, bonds, government savings, and more. When these areas are combined with investment in stocks, then an investor is really starting to exercise diversified protection.

Most regular investors have a limited budget for investing and may find it difficult to create an adequately diversified portfolio. This fact alone is one of the major reasons mutual funds have seen such a sharp increase in popularity. Buying shares in low cost, passive, index mutual funds can provide investors with an inexpensive source of diversification.

A Lesson in the Importance of Diversification 

During the mid 2000s, the big boom was stocks and real estate. But as the bubble burst at the end of the decade, investors who had most of their money locked up in one or the other lost two-thirds of their investment when the bottom fell out from under the market. Even the most diversified investor still took a loss, but those who had truly worked to diversify their portfolio took less of a loss. Those closest to retirement age who hadn't diversified their portfolio were hit the hardest, as they didn't have the luxury of  waiting years for the market to bounce back. 

We are seeing history repeat itself today. At the beginning of the 2018, the Stock Market was at an all time high and everyday was a new record for the Dow.  This surge was driven largely by high corporate earnings especially in the High Tech Sector.  There was also very little volatility - prices kept going up but not down.  The seemingly low risk investment environment and fear of missing out overheated the market and gave investors a false sense of security.  There was a feeling that earnings growth was guaranteed.  Why invest in low yield bonds when you could get higher (and almost guaranteed) returns with stocks?  Which is what some investors thought.  

Investors who were heavily invested in stocks and not properly diversified, received their wake up call yesterday, February 5th.  The Dow Jones lost almost 1,200 points which is the worst point decline in history.  The stock market declined sharply for a number of reasons but emotions played a big part in the sudden drop.

How do everyday investors protect themselves from these events?  Through Diversification.  Again, diversifying a portfolio is not about getting a bunch of different shades of the same investment type. It is really about mixing different investment types that are entirely unrelated to each other in how value is generated. A good offense is your best defense and in general, a well-diversified portfolio can weather most storms. Of course, your diversification strategy should also change with time as you get closer and closer to retirement. Working with a financial advisor who understands your goals, risk tolerance, and retirement plans can be crucial to helping you create a portfolio that is truly diversified. 

_{The information in this material is not intended as investment, tax, or legal advice.  The opinions expressed and material provided are for general information only.}

1. Capital Assets. Capital assets include property such as a home or a car. It also includes investment property, like stocks and bonds.
    
2. Gains and Losses. A capital gain or loss is the difference between the basis and the amount the seller gets when they sell an asset. The basis is usually what the seller paid for the asset. For details about inherited property, see IRS Publication 544, IRS Publication 550 and IRS Publication 551.
    
3. Net Investment Income Tax. Taxpayers must include all capital gains in their income. Capital gains may be subject to the Net Investment Income Tax if the taxpayer’s income is above certain amounts. The rate of this tax is 3.8 percent. For details, visit IRS.gov.
    
4. Deductible Losses. Taxpayers can deduct capital losses on the sale of investment property but can’t deduct losses on the sale of property they hold for their personal use.
    
5. Limit on Losses. If a taxpayer’s capital losses are more than their capital gains, they can deduct the difference as a loss on their tax return. This loss is limited to $3,000 per year, or $1,500 if married and filing a separate return.
    
6. Carryover Losses. If a taxpayer’s total net capital loss is more than the limit they can deduct, they can carry it over to next year’s tax return.
    
7. Long and Short Term. Capital gains and losses are either long-term or short-term. It depends on how long the taxpayer holds the property. If the taxpayer holds it for one year or less, the gain or loss is short-term.
    
8. Net Capital Gain. If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain. If the net long-term capital gain is more than the net short-term capital loss, the taxpayer has a net capital gain.
    
9. Tax Rate. The tax rate on a net capital gain usually depends on the taxpayer’s income. The maximum tax rate on a net capital gain is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gain.
    
10. Forms to File. Taxpayers often will need to file Form 8949, Sales and Other Dispositions of Capital Assets. Taxpayers also need to file Schedule D, Capital Gains and Losses, with their tax return.