Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

Print
PDF

How to Access the DWM Blog

Written by Grant Maddox.

email-logo.pngAt DWM, we work hard to stay up to date on all things related to your total wealth management. We share this important information with you through our weekly blog, so you can count on being one of the first to know. To ensure that you and your friends are always on top of current financial trends and insights, please consider subscribing to our email list to get new blogs sent directly to your inbox.  

 Do you have a friend you want to add to our email list or just having trouble receiving our emails? Since our blogs are sent out through a third party, Robly, and not our normal Outlook email, it’s possible you may not be currently receiving our weekly blog posts. Check out these troubleshooting tips below:

 How to get added to the blog list:

 This is the most simple and straightforward of all our troubleshooting tips. If you want to receive new blog posts from us in your inbox, simply email us with the email address you would like added and we’ll add you to our list. It’s that easy! Financial knowledge is just an email away.

 What to do if you’re not receiving our blogs:

 If you’ve already joined our email list and suddenly stop receiving our weekly blog, there are a couple of different solutions to this problem.

 Our emails may be winding up in your spam folder unintentionally. Luckily, there’s an easy fix for this! Just select the email within your spam folder and mark it as “not spam.” For Gmail users, the solution to this problem can be seen in the screenshot below. Once an email is marked as “not spam,” your email should recognize this as a trend and all future emails will be sent to your general inbox.

gmail3.png

Another solution is to just add the following domain names to your approved senders list within your email:

 @dwmgmt.com

Dwmgmt.onmicrosoft.com

 You can also add each DWM team member’s email address to your address book in your email to ensure that our emails are among your approved senders list:

  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 If your email is a company email, you may need your company to add the domains to their list of safe senders to effectively “whitelist” the DWM domain names. Whitelisting means that the sending server will be recognized by the receiving server, so the emails will be allowed to come through. Give your company this list of IP addresses to whitelist and avoid missing emails in the future:

 o1.email.robly.com 167.89.4.152

o2.email.robly.com 198.21.2.52

o3.email.robly.com 167.89.4.151

o4.email.robly.com 198.21.2.12

o5.email.robly.com 167.89.22.221

O6.email.robly.com 167.89.47.135

o7.email.robly.com 167.89.22.181

o8.email.robly.com 167.89.42.97

o9.email.roblynyc.com 198.37.154.222

o10.email.robly.com 167.89.12.30

o11.email.robly.com 167.89.4.153

o12.email.robly.com 167.89.34.81

o13.email.robly.com 198.37.154.173

 How to remove yourself from our email list:

 In the rare event that you dislike weekly financial updates, you can unsubscribe from our email list by clicking the “Unsubscribe” button at the bottom of every blog email.

 As always, should you have any questions or concerns regarding access to our blog or any of our email communications, please never hesitate to reach out to us at any time via email, phone or even “snail” mail.

Print
PDF

The Mighty Dollar

Written by Ginny Wilson.

Starbucks cupsWith tax cuts and tax returns on everyone’s minds, we think it is a good time to look closely at our favorite currency!  We might call it “dough”, “bread” or “cheddar”, we have “bean”-counters to keep track of it and we use simple, gastronomic valuations, like the Big Mac Index, to compare it to its peers.  Thinking about the US dollar and its’ value might just make you hungry!   The dollars’ worth is determined by the foreign exchange market, but investors and economists alike are always looking for ways to value the currencies and look for explanations or even monetary conspiracies, to explain currency fluctuations.

In 1986, The Economist came out with the Big Mac Index as a simple way to discuss exchange rates and purchasing-power parity (PPP), which compares the amount of currency needed to buy the same item in different countries, in this case a Big Mac. The Wall Street Journal came up with their own modernized version of this same idea with their Latte Index, which compares the price of a Starbucks tall latte in cities around the world.  For example, in New York City, the WSJ reporter could buy a tall latte at Starbucks for $3.45.  Other WSJ reporters would need to spend $5.76 in Zurich, $4.22 in Shanghai, $3.40 in Berlin (almost the same as the U.S.), $2.84 in London and $1.53 in Cairo.  These simple comparisons of the price of a good that is available in many countries can be an indicator of whether foreign currencies are over-valued or under-valued relative to the US dollar. 

 There are some criticisms of these simple tools.  Costs of these products can depend on local wages or rents, which are generally more expensive in richer countries and can add to the cost of the product.  The price for a Starbucks Latte can even fluctuate amongst American cities or specific locations, like airports, which may have higher rents.  And adjusting these indices for GDP will change the data and perhaps improve their accuracy.  Some also have pointed to the ingredients in these particular items as causing value differences.  McDonald’s, for example, must use strictly British beef in the U.K.  Starbucks can be a little more consistent, as coffee beans are not generally grown in most of the countries they operate in, so the imported price is pretty standard.

coffee.jpg

What these indices don’t tell us about the currency market is why fluctuations occur.  For example, why has the U.S. dollar hit a recent three-year low?  According to an article in yesterday’s WSJ, one simple explanation for a weakened dollar is that “the economies in the rest of the world are finally growing again, so their currencies are strengthening. The U.S. economy isn’t improving as fast—because it was stronger to start with—so the dollar’s falling.”  The Chinese yuan has gained 3.8% so far in January after gaining 6.7% in 2017, which has the officials at the People’s Bank of China concerned about their exports.  President Trump and the U.S. have been critical of any Chinese central bank policies that would devalue the Chinese currency and cheapen goods coming into the U.S.  This trade friction complicates China’s management of their currency, particularly as they attempt to make the yuan a more market-driven currency.

Adding to the currency gap with China and the drop in US currency values overall were comments made last week by the U.S. Treasury Secretary signaling Administration support for a weaker U.S. dollar as being “good for trade.”   Such overt comments are traditionally avoided by the Treasury Department, but may spotlight the Administration goals to reduce the trade deficit and allow currencies to float freely.  President Trump reiterated his stance on trade imbalances in his State of the Union address, pledging to “fix bad trade deals” and that he expects trade deals to be “fair” and “reciprocal”.  Another factor that may weaken the dollar is the belief that 2018 will bring a tightening of monetary policy by the international banks.  Some banks, like the Bank of Canada and Bank of England, have already raised rates.

A weaker dollar makes U.S. goods cheaper to foreign markets, but there is a risk of undermining confidence in an array of U.S. assets, like the U.S. Treasury market.  As the WSJ article explained, as the new tax law expands the federal budget deficit, the government will look to sell the debt to foreign investors.  Those investors may demand higher rates to compensate for the risks of a weaker currency and those costs could fall onto the U.S. taxpayers.

So, we should think about our American dollar today and perhaps look at our paychecks or tax returns to see what has changed.  At DWM, we are always careful to think about each and every one of your dollars – the ones you invest, the ones you save, the ones you spend and the ones you pay in tax.  Using the simple Big Mac or Starbucks Latte indices might help us remember all the factors that go into the value of a dollar around the world.  For me, I certainly prefer to imagine buying a tall latte in Zurich over a Big Mac!   

 

 

Print
PDF

Dow 26,000-When’s the Last Time You Thought About Your Risk?

Written by Les Detterbeck.

 

risk profileWith U.S. stocks at all-time highs, now is the perfect time to review your risk profile and then make sure the asset allocation within your investment portfolio matches it.  Equity markets have been on a tear.  In 2017, the average diversified US stock fund returned 18%, while the average international stock fund returned 27%.  In the first three weeks of 2018, the MSCI World Index of stocks has increased 5.6%. With low interest rates and inflation, accelerating growth and the recent passage of the Tax Cuts and Jobs Act, it looks like this streak could continue in 2018.

During the current nine year bull market, investor emotions about stocks have gone from optimism to elation and many investors now are not only complacent, but overconfident. Yet, with valuations soaring, we are approaching the point of maximum financial risk.  Certainly, at some point, we will have a pullback, correction or crash.

It always happens.  It could be a conflict in N. Korea or Iran or somewhere else.  It could be a worldwide health scare.  It could be higher interest rates negatively impacting our rising national and personal debt.  It could be something none of us even consider today.  History shows it will happen.  We need to be ready for it by having an asset allocation in our portfolios that matches our risk profile.

What exactly is a risk profile?  There are three components of your risk profile.  First, your risk capacity, or ability to withstand risk.  Second, your risk tolerance, or willingness to accept large swings in investment returns.  It’s the way we are hard-wired to respond to volatility.  Third, your risk perception, or short-term subjective judgment about the characteristics and severity of risk.

We classify your risk profile into one of five categories of risk: defensive (very low), conservative (low), balanced (moderate), growth (high) and aggressive (very high).  As a general rule, younger investors are more willing to take on a higher level of risk.  However, that’s not always true.  Investors in their 80s and 90s who know that they have ample funds for their lifetimes and beyond, and who can emotionally handle high risk, may have an aggressive risk profile, particularly when they plan to leave most of their money to the beneficiaries.  Everyone’s circumstances and emotions are different.  Profiles can change over time, particularly when there are life changing events, such as marriage, birth of a child, loss of job, retirement, changes in health or other matters.  Therefore, it’s important to regularly assess your risk profile. 

Here’s the process:

 

Step 1. Quantify your lifetime monetary goals and compare those with your expected lifetime assets. During your accumulation years, how much will you add to your retirement funds per year?  How many years until retirement?  How much money will you need to withdraw annually during retirement for your needs, wants and wishes?  What are your sources of retirement income?  What's your realistic life expectancy?  What market return is required to provide the likely outcome of success- not running out of money?  Do the goals require a high rate of return just to have a chance of success or is the goal so low risk that even a bad market outcome won't cause it to fail? 

Risk capacity isn’t simply the amount of assets you have; rather it is the comparison of those assets to your expected withdrawal rate from your portfolio.  A low withdrawal rate from your portfolio, e.g. 1% or 2% a year, means you have high risk capacity. A high withdrawal rate, such as 6% or more, means you have low risk capacity.

Step 2.  Evaluate your tolerance for risk.  What’s your comfort level with volatility?  Are you aggressive? Moderate?  Defensive? How does that compare to the risk needed in your portfolio to meet your goals?  If the risk needed to meet your goals exceeds your risk tolerance, you need to go back and modify your goals.  On the other hand, if your risk tolerance exceeds the risk level to meet your goals, does that mean you need to take on more risk just because you can or because you can afford it? You need to go through the numbers and make important decisions.

Step 3. Compare the risk in your portfolio to your risk tolerance.  Separate your assets into all three classes: equities, fixed income (including cash) and alternatives and determine your asset allocation.  A balanced portfolio might have roughly 50% equities, 25% fixed income and 25% alternatives.  An aggressive (very high risk) portfolio could have 80% equities and a defensive (very low risk) portfolio might have only 10-35% equities.  If your portfolio is riskier than your risk tolerance, changes need to be made immediately.  If your portfolio risk is lower than your risk tolerance, you still need to make sure it is of sufficient risk for you to meet your goals, considering inflation and taxes.

Step 4.  Rebalance your portfolio to a risk level equal to or less than your risk tolerance and sufficient to meet your goals.  Make sure you diversify your portfolio within asset class and asset style. Diversification reduces risk.  Reducing portfolio expenses and taxes increases returns. Alternatives are designed to reduce risk and increase returns. Trying to time the market increases your risk. Set your asset allocation for the long-term and don’t change it based on feelings of emotion. Stay invested.

Step 5.  Most importantly, regularly review and monitor your goals, risk profile and the asset allocation within your portfolio.  The results: Improved lifetime probability of financial success and peace of mind.

DWM clients are already covered because we regularly rebalance to their Long-Term Asset Allocation target and, when meeting, determine if anything significant has changed in their lives that would cause a change in their risk profile. 

 

 

 

 

 

 

 

 

 

 

Let's Get Acquainted

We offer a complimentary "Get Acquainted" meeting to describe our services, and to see if our services are right for you.

Contact Us