Tax planning is a critical component of a successful financial plan. As you search for the right financial advising partner, you’ll want to understand their tax planning capabilities. Many people think about a financial plan as investment advice, helping them feel secure for retirement and ensuring their legacy. However, almost everyone wants to know about tax implications and how to shelter their wealth from potential tax pitfalls.

There are many ways to reduce your tax liability that your financial advisor can help you implement. Here are five key elements of a tax-focused financial plan:

#1 — Tax-Efficiency

When you think…

If you thought small cap stocks were the winners in the market’s climb back from 2020’s pandemic lows, you’d be right. But did you realize the extent of their outperformance?

We’re asked about rising interest rates a lot, and in a blog post last month Roger Hewins addressed the stabilizing function of a bond allocation in a diversified portfolio. This chart looks at it in another interesting way:

The red diamonds indicate the largest drawdown (drop from peak to trough) for the S&P 500 during each of the past 20 years. You can see the big decline in 2008 during the global financial crisis and the most recent dive in the first quarter of 2020 as the market reacted to the pandemic, dropping over 30%.

The blue dots indicate year-to-date…

In a reversal of the fear and uncertainty that gripped many in the first quarter of last year, investors appear to be looking to the future with a sense of optimism about a US economy poised to reopen. After the rapid market decline last year, the Fed stepped in quickly, providing liquidity to markets and preventing uncertainty from turning into panic. Fiscal policy was also accommodative, with multiple bills designed to provide support to individuals, companies, and states, including the $1.9 trillion dollar bill signed in early March[i].

After unemployment peaked at roughly 14% last year, it is now just…

The rotation continues

The first quarter of 2021 saw more of the so-called “rotation” into small and value stocks that started last November with the announcement of the first vaccine. We now have roughly 30% of the country, and more than 60% of people over 65, having had at least the first vaccine[i].

From a market perspective, the end is in sight, even though we are not out of the woods yet and need to continue following good practices and staying safe. The “pandemic trade” was buying the big tech stocks that did so well during the lockdowns. …

A lot has happened in the world over the past year, and while everyone’s physical health is top of mind, financial health is also a concern for many. You may be considering ways to better prepare for the next time something unexpected happens in your life. This is a good time to reflect on how your financial plan held up to the relentless tests it faced in 2020.

Here are three things to think about when assessing your financial health and preparing for future uncertainty.

Sense of security

How secure did you feel about your financial health when you first…

A few years ago, in a desperate attempt to make Fed policy even mildly interesting, we introduced our little friend[i] to you. At the time, after massive intervention into the fixed income markets in response to the 2008 financial crisis, the Fed hinted that it might start “tapering back” on its support. The market did not like that news and quickly responded with what came to be called the “Taper Tantrum.” Thus the Tapir made his entrance for several letters. We grew kind of fond of him.

I thought of this last week, wondering if we were potentially looking at…

“In the short-run, the stock market is a voting machine. Yet, in the long-run, it is a weighing machine.” — Warren Buffett[i]

While the last week in the markets has felt like being on Mr. Toad’s Wild Ride at Disneyland, Warren Buffett’s famous quote on stock market behavior seems more pertinent than ever. The recent wild moves in the shares of GameStop and a handful of other names have completely detached the firms’ market values from their underlying business fundamentals.

Buffett is saying that in the short run, stock prices can be largely driven by human reaction and emotion. A…

2020 was a year that no one will forget. A devastating pandemic wreaked havoc on our lives, and the resulting shelter in place orders wreaked havoc on the economy. US GDP dropped a historic 32.9% in the second quarter, and the unemployment rate peaked at 14.7%, a record outside the Great Depression.[1] It was also an unforgettable year for the global markets — but not for the reasons we would have thought back in April. This past year was a stark and humbling reminder that predicting the market is extremely difficult, if not impossible. …

After a year like this, I don’t know what to say. Belaboring the obvious seems pointless, and yet it seems incumbent on me to try to convey something meaningful. We can’t just let such an eventful year pass by unremarked.

What just happened here?!

Well, we were walking down the road (trying to loosen our load[i]) in an election year, minding our own business and preparing for God knows what kind of political fireworks, when something deadly crept up on us. …

Team Hewins

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