If you’re trying to build wealth, sharp market downturns can be your biggest enemy. But these downturns are not uncommon and we want you to be prepared to overcome these market dips. On today’s episode, esteemed money manager, Jay Pestrichelli joins us to discuss buy and hedge retirement planning. He’s the author of Buy and Hedge as well as the owner and co-founder of ZEGA Financial. 

Over the long term the market usually performs well, yet with all the volatility we’ve seen throughout the start of 2022 many of us are getting nervous. Even before this year, Jay notes the S&P has had violent volatility that has evolved over several years. Looking at these turns in the market it really comes in 3-to-5-year waves. The most current starting in February of 2020. What does this mean for investors? It means that volatility comes in cycles and is something that we need to prepare for. 

ZEGA and the Redefining Wealth process utilize hedging in a lot of portfolios that can bring nice returns as opposed to a traditional 60-40 broad asset allocation. Hedging is managing stock market risk. It's a long-term investment strategy that is very useful for people approaching and in retirement, people that don’t have the time to withstand this type of market volatility. Join us today as we explore the importance of hedging, developing a plan, and more with Jay Pestrichelli.

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We discuss many different money management tools on our show but having a defined process is perhaps the most important thing investors need to consider when constructing their plan. Having a process allows you and your assets to perform at peak capacity. Customized to each individual a process should cover your income needs, investments, tax planning, estate planning, and liquidity. 

While many of us may be tempted to chase the market, we want to ensure we have a consistent rate of return, especially as we inch closer to retirement. Your plan needs to cover both inflationary and non-inflationary expenses when constructing a cash flow analysis. Once you know how much cash you need in retirement you can position your assets to achieve those goals. 

A financial framework like the one we follow in the Redefining Wealth Process is a financial baseline that gives many clients the confidence they need in both the accumulation and decumulation phase of financial planning. On today's episode, we'll explore the importance of developing a customized process in your financial plan and how it will help you achieve a stable retirement future. 

Check out Episode 92 mentioned in today’s show: https://redefiningwealth.info/92-volatility-the-retirement-killer/

Get a free copy of our “How to Survive a Bear Market Guide”: [email protected] 

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Show notes: https://redefiningwealth.info/96-the-financial-planning-process/

‘Heads I win, tails you lose.’ In this uncertain time, investors are facing a lot of volatility. We often discuss using tactical management and algorithms to prevent losses but what other tools are available? How can we win when the market goes up and when the market goes down? We can always be certain the market will do one of three things: go up, go down, or go sideways. So we have to prepare and properly protect ourselves for all three outcomes. On today's episode, we'll discuss the value of a tail hedge, managing tail risk, using a tail hedge versus an algorithm, and how this insurance tool fits into your overall portfolio construction. 

 

Facing a black swan event and managing loss becomes much more significant as you reach retirement. In the same way, we protect our home, our car, and our health with insurance we should also be protecting our portfolio. By managing your tail risk, you are able to utilize insurance within your portfolio. This allows you to stay competitive when the market goes up and you will continue to make gains when the market inevitably goes down or sideways. 

 

With a tail hedge, if you experience a 20% loss, your returns are made while the market is going down rather than when it is coming back up. A tail hedge can allow for a 75 to 25 allocation that outperforms the cost of the insurance, mathematically it's a sound decision to implement within your investment strategy. Putting together a diversified and properly allocated plan with budgeting, cash flow, inflation, and protection all taken into account is more essential than ever. 

Get a free copy of our “How to Survive a Bear Market Guide”: [email protected] 

 

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Special Guest, CFA, Portfolio Manager David Wagner of Aptus Advisors, joins us on today’s episode to discuss the various factors contributing to market volatility in 2022. As a portfolio manager David is constantly studying the market, understanding the impact it has on investors. Should we expect a recession? What will bring down inflation? David will share his expertise on these topics and more during our show. 

The market has been in a tailspin and a lot of factors are playing into this. From a geopolitical standpoint, there’s a lot of uncertainty so we are seeing some bearish trajectories. But this may be a buying opportunity according to David. 

The Russian invasion of Ukraine could really impact Americans’ wallets when it comes to energy and consumer spending, but only time will tell. We are still expecting rate hikes despite this conflict and David assumes this won’t change. The Fed tends to avoid uncertainty when possible. On the other hand, David sees inflation as mostly a supply problem and something that can be addressed. In the short term, if we see some supply chain relief, we could see prices come down. In the long term, productivity will drive inflation down. 

David doesn’t think investors should be worried about a recession in the near future. The economy, which is the basis of the market, is doing very well. If you are getting closer to retirement these events may seem daunting, but having a strong and diversified plan can protect your future. 

Get your free copy of “How to Survive a Bear Market Guide” by emailing [email protected] or https://redefiningwealth.info/

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Are you dreading this upcoming income tax season? It may be time to switch from tax preparation to tax planning. Strategic planning can reduce your overall tax burden, making this time of the year a lot less stressful. You should be working with a tax professional that is a part of your overall financial planning team. 

One of the first steps in tax planning is projecting your future income. This means looking at your accounts, tax brackets, and your projected taxes with an as-is scenario. If you are in your earning years you have to understand the impact of earning even on more dollar and what that does to your overall tax plan. In contrast, a lot of retirees are leaving money on the table. Strategic tax planning can save you stress, time, and money. 

We also want to be able to make knowledgeable decisions about our future income, predicting where taxes are going to go and how far. Unfortunately, we can’t predict the future, but there are strategies to proactively pay taxes now instead of waiting for higher taxes in the future. On today’s episode, we’ll discuss these planning steps and a variety of planning strategies that can reduce your overall tax burden. 

For a copy of our 2022 tax guide please email: [email protected] or go to https://redefiningwealth.info/schedule/

Review the article mentioned in today’s show >> 

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January ended up being a pretty volatile month in the market. With inflation, geopolitical tension, and rising interest rates we may see more volatility in the near future. What is the danger this poses to our retirement? A fear of outliving your money coupled with recency bias can lead to an unbalanced portfolio. Portfolio failure, running out of money in retirement, is directly related to volatility. However, there are tools and strategies to navigate a choppy market. 

Think of standard deviation as a relative risk rating. Lower standard deviation means lower risk or volatility. Using a Monte Carlo simulation spreadsheet, we can forecast the probability of potential failure rates. We have to examine how much risk you are taking in relation to the return you need for a successful retirement. You want to build a plan with the highest probability of success. 

How could you still go broke in your portfolio with a 20% return? 

If we have two portfolios and put a million in each:  

Say Portfolio A made 60% the first year or $1.6 million. In year 2 we lost 40% and our previous $1.6 million is now a net of $960,000. 

Portfolio B made 30% in the first year or $1.3 million. In year 2 if we lose 10% our $1.3 million now has is a net of $1,170,000. 

Dividing both of these portfolios over 2 years, both portfolios average a 10% return but Portfolio B has more money in it with a gross increase of $210,000. This shows, you could have two portfolios with the same return, but the lower volatility portfolio could mean the difference between success and failure in retirement. Join us as we evaluate standard deviation, the traditional 60/40 portfolio, the benefits of lower volatility portfolios, and more on today’s show. 

Email [email protected] for your guide and report on defending yourself against a bear market. 

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Review the article mentioned in today’s show >> 

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As we’ve seen in the past month, volatility is back in the market. Why are we seeing this volatility and what can we do to protect our retirement plan? We’ve seen some robust gains in the past few years, but that might soon be changing. With changes from the Fed, interest rate hikes, and geopolitical tension the market is likely to see more ups and downs. 

In most cases, people aren’t great at making decisions under pressure, especially when it’s an emotional choice dealing with their own finances. This is the advantage of working with an advisor. You are working with someone that understands volatility and they can keep you level-headed when the market starts to turn. On today’s episode, we’ll explore ways you can protect yourself against a bear market through diversification, risk management, and more.

Review the article mentioned in today’s show >>

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Timestamps (show notes):

 

1:57 - What’s causing market volatility?

14:36 – Avoid emotional decision making  

18:26 – What does it mean to diversify?

23:47 – Don’t get stuck on a loss 

28:25 – Manage your risk and plan for opportunity

32:47 – Have an adaptive retirement plan

For many of us a 401(k) is our primary saving tool for retirement. So, why is the 401(k) now being considered a disaster? Most people don’t have a lot of background in investing when they start saving, defaulting instead to the guidance of their employers. Originally developed to be a bonus in accordance with a pension, the 401(k) was not designed to be a stand-alone account to depend one’s retirement on. However, that's where many people's financial plans stand today. 

Consequently, 401(k) plans were never analyzed as a replacement retirement vehicle, therefore, no one scrutinized the long-term practicality of using a 401(k) in this way. As we’ve seen more and more companies step away from pensions, we’ve also seen more investment in this type of account.  For big companies and wall street the 401(k) was a big win, for the average American people, not so much. It’s been a poor substitute for a pension plan. On today’s episode, we’ll explore the history of the 401(k) and whether it can be considered a disastrous retirement vehicle.  

 

The book mentioned in today’s show >> 

Wealth Unbroken 

Today’s episode and show notes can also be accessed by visiting: 

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There is no perfect portfolio that will fit everyone’s needs. Instead, we must ask ourselves what the perfect portfolio looks like for our individual lives. The market is a risky endeavor, so you really need to understand how much volatility you are comfortable with and how much is necessary to support the longevity of your retirement. Not everyone will look at risk in the same way. You'll need to think about the entire framework of your plan, updating it when necessary. In order to start building the perfect portfolio, experts suggest focusing on your principles, process, and path. 

Do you need professional assistance to help with your plan? This will depend on what they bring to the table, professionals can certainly help prevent blind spots in your plan. Can you pinpoint your comfort zone when it comes to financial gains and losses? Doing so can certainly be difficult if you are used to making emotional decisions. On today’s episode, we’ll explore 7 principles that are necessary to consider when building your perfect portfolio.

Review the article mentioned in today’s show >> 

 

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Everyone has worries in life, especially when it comes to money. Does money have the power to change your life? It certainly can take care of our basic necessities. However, worrying too much can lead to questionable decision-making and unhealthy levels of stress. An obsession with your bank account may be a sign of deeper anxieties that money can’t solve. If you feel this way you are not alone, especially in today’s world. 

People may react to returns in their portfolio by taking on more risk. But is this wise? It really depends on where you are in your retirement planning journey. Perhaps you had a bad experience in the market and now you are a conservative investor. Do you really know how much risk you are taking on though? We want to avoid making those emotional decisions when we can, that’s why having a financial advisor is so important. On today’s episode, join us as we discuss the correlation between money, happiness, and our financial future. 

 

Review the article mentioned in today’s show >> 

 

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