Shotwell Rutter Baer

Michigan State offers three retirement plans that work together based on how much the employee intends to save. Here are some tips on how to make the most of them.

The first two plans work together:

The third plan is the Michigan State University 457(b) plan, which allows for further contributions. Each of these plans has different rules, along with four tiers of investment options. Let’s take a look.

Your eligibility to participate in the base plan and receive the University matching contribution depends on your employee group/job category. The base retirement plan is either voluntary or mandatory based on three things:

If you’re not sure where you fall, check out the base retirement eligibility rules for your job category.

You can contribute up to 5% pre-tax and you will receive a university match of 5% if you are:

All other employees receive a 2 for 1 match up to 10%.

If you want to contribute more than 5% of your income to your retirement plan you can contribute to the supplemental retirement program up to 100% of your compensation. This has a maximum of $19,500 and an additional $6,500 if you are over age 50. The 5% of the base retirement plan contributions count against your $19,500 only if your contributions are considered voluntary instead of automatic.

Follow the link above to check the rules for your job category.

If you want to contribute more than the maximum to the supplemental retirement plan you can contribute to the deferred compensation plan. This plan has a separate limit of $19,500 (an additional $6,500 for folks over 50). There are also further additional contributions that you can make from age 62 to 65. The additional contribution rules can be tricky, so if you are considering them check with an advisor to make sure you are eligible.

There are two different vendors for your retirement plan, TIAA & Fidelity. Each vendor has four different investment tiers.

These target-date retirement funds are managed by Vanguard based on your expected retirement date. These funds are designed to adjust their risk exposure as you get older and near the designated target date. They can be a good, simple option for investors who are looking for a broadly diversified portfolio managed by a large institution. This is the “set it and forget it” option that you don’t have to adjust unless you plan on adjusting your retirement time frame. Target date retirement fund options are the same at both Fidelity and TIAA.

Index funds are passively managed investment funds that seek to match the performance of a major asset class at a low cost. If you want to put a portfolio together with a low-cost portfolio and manage it on your own, these funds can be a part of that solution. Index fund options are the same at both Fidelity and TIAA.

Actively managed funds seek to outperform the market with stock selection. This can be achieved in a variety of ways depending on the style of the manager. These options may be a fit for building your own portfolio or combining with index funds for greater diversification. Most of the actively managed fund options are the same at Fidelity and TIAA, but there are a few different options available based on the plan vendor. Be sure to check into those options if you intend to use actively managed funds in your retirement portfolio.

Opening a self-directed brokerage window in your MSU retirement plan allows you to invest in thousands of investment vehicles from mutual funds to exchange-traded funds to individual stocks. While this is the most expansive investment option it does come with the potential for more risk. Most of the funds are not monitored by MSU and it is, therefore, your responsibility to monitor those funds. There can also be additional fees and expenses associated with these options although many of them have no additional fees or transaction costs. This is a great option for someone with vast investment experience or who is working with a financial planner.

If you started employment at MSU before 2012 you may notice that you have two sets of retirement plans. One pre-2012 and the current plan. You may also have plans for other colleges or universities that you previously worked at. These plans can be rolled into your new plan or into an individual IRA depending on the plan rules.

There are differences in the available investment options for plans pre-2012 that you may consider rolling into your current plan. One thing is for sure, it’s much easier to manage two or three retirement accounts than it is five or six.

The financial advisors at Shotwell Rutter Baer are particularly versed in MSU retirement plans and work with many employees of the university to maximize their retirement plan benefits and abilities. If you would like to find if there is more you can do with your MSU retirement plan, give us a call at 517-321-4832.

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

Budgeting is hard enough for most people, but when you only get paid nine months out of the year, how do you manage your month-to-month expenses?

The trick is to budget for the summer during the rest of the year.  You do this by building up a balance that you can use to see you through three months without a paycheck. This sounds simple enough, but in practice, we have found it proves difficult for some educators to implement.

Here’s an approach that we think gets the job done:

This is a situation where budgeting software, such as You Need A Budget (YNAB), really shines.

When summer rolls around, the funds will be there for you. If you don’t use a budget program that allows you to designate how you spend the money in your accounts, I would recommend opening a designated savings account to hold the funds you are setting aside for summer.

The above calculations work well if you are starting your savings plan in September and have the whole nine months to save for the following summer. If that’s not the case (life is never that simple, right?), then use the number of months left before summer to calculate what is needed.

For instance, if it is January and you are paid through the end of May, you need to divide the total in column four by five instead of nine to get what you need between now and summer. That may result in some unreasonable numbers. If that is the case, you need to re-prioritize your overall budget and make certain that basic expenses (your obligations like rent or your car payment) are covered.

Teacher’s income may have twelve months’ salary lumped into nine months of pay, but what if your income is less predictable? Contractors and freelancers may have good months and bad months. Also, many salaried professionals get an annual bonus. In the bonus situation, we suggest budgeting for priority, fixed expenses out of a regular salary, and then using the bonus to catch up on savings goals or discretionary items like vacation funds.

If you don’t have a set salary and your income fluctuates from month to month, try to build a budget around a minimum average expected income. In months where income is higher, set money aside using the same principles outlined above to make sure you can cover expenses during slower months. The more irregular your income, the more important your budget becomes, as well as having a well-funded contingency fund.

We are financial advisors and live to help people create workable budgets that provide for all of their needs based on their income, no matter how irregular or unpredictable it is. Give us a call today at 517-321-4832

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

My adult child needs financial help. Can I afford it? Should I help?

We get questions about how to financially help adult children all the time from our clients. This is a true kitchen table conversation about real life and real decisions.

Oftentimes parents feel they do not have a choice and should help their adult child financially. But it is important to understand how that will impact your own financial stability and retirement.

David and Nick tackle some common scenarios and offer their opinions on whether they would do it or not, and why.

Helping with a down payment or co-signing on a loan.

Nick: I wouldn’t shy away from helping with a down payment. This is a stepping stone. You can end up saving a lot of money with a decent down payment with the same loan terms. I don’t think I’d co-sign. If you need a co-signer it means you don’t have enough credit or good enough credit.

David: I’m with you on that. If you find that you are trying to get around the requirements for a mortgage, it’s a sign that you maybe you shouldn’t be taking on that type of loan. You might be going a little too far. The rules are there to protect the bank and to keep you from getting in over your head.

If your young adult child is just a few years out of college and changes jobs or careers. He or she may not have a safety net or savings to cover being unemployed short-term.

Nick: I would probably help in this situation. When it comes to working you have to do something you are passionate about, and sometimes that means taking a pay cut or taking on some risks. When you do this, what often ends up happening is that you make more money, in the long run, doing something you are passionate about than stuck in a job you don’t like. So I would help in this situation since this a family value of mine, even if it doesn’t make the most financial sense.

David: I pretty much agree with that. I would want to talk about what the long-term plan is. I’d want to feel good that there was the right solution in the works and it wasn’t just part of a pattern. You have to be careful not to perpetuate behavior that a few hard knocks might straighten out.

Nick: There is a big difference between changing careers to something you are passionate about or changing careers because you don’t know what you want to do.  Are you helping by helping or are you hurting by helping?

Nick: I have mixed feelings about this one. For the most part, I would be hands-off. If I were to do something it would be more along the lines of a loan. However, if I thought my child was being accused of a major crime they didn’t commit, I’d have a hard time not stepping in and helping.

David: This is a tough one. I’d probably do what I felt I had to but tread cautiously.

David: When someone is put in a tough financial situation through no fault of their own, it is pretty hard to not help. At that point, the guest room is available and we’ll do what we need to do.

Nick: This one is the toughest for me. Sacrificing my financial security to keep my kid healthy. I would do whatever I could. But the flip side of that is how much is too much? Between keeping yourself healthy, your kid, and your family. That is a really tough balance.

David: I am more inclined toward a tough-love approach when it comes to this. This feeds back into the job change idea too. I’m all for finding the career you are passionate about, but sometimes you have to wash some dishes and rake some yards to bide your time while you are figuring that out. Sometimes you have to have a job you hate for a while until you find the one you love.

Nick: I lean toward your logic in this, but I know for a fact my wife doesn’t. It’s a value of ours to have an open-door policy, but that doesn’t mean it will always help the kids.

David: Adoption has cross-generational implications. It is a deeper question when you consider helping your child start their own family. And that can be a very expensive proposition. It has a much bigger dimension to it than a financial value.

Nick: For me, this is much more selfish because I want to be a grandparent someday.

Nick: This is one that goes back to your own values. I don’t know at the moment what I’d do financially in this situation.

David: I don’t know what the financial implications would be, but I’d be there for my child.

All of these scenarios are not cut and dry and involve a lot of emotions and values. Talking about money and family is hard and all of these scenarios get to the heart of the matter pretty quickly.

The first step is deciding if you want to financially help. The second step is determining if you can afford it. This is where your financial advisor can really help.

Long-term planning. We have the tools to visually look at the financial impact long term.

Strategy. The tactical level of what is the best way to do it. It’s not always as simple as taking money from this account and using it toward the issue. There can be tax implications. We can help you look at scenarios like retirement. for example, you are currently planning on returning at 65, but spending this money to help your child will now mean you will retire at 67. Knowing this, you can decide, is it more important for me to help my kid buy a house or to retire at 65? Then we are making our decisions on what our values are, not just what the best financial scenario is.

The financial implications of a one-time expense are not always as bad as people think. So don’t assume you can’t afford it if you are serious about doing it. Talk to us first and we will help you make that determination.

Planning is flexible. If you make a plan this year, you have to expect things will come up. We build in adaptability and flexibility. We are talking about the ability to get money back and money that doesn’t have strings attached. If things didn’t come up, you’d only need to talk to a financial advisor once in your life – and that is just not how life works.

Is it wise? Just because it is affordable, should you do it? Is it going to help your child be a better human and be in a better situation? Or will you need to continue helping them? For example, if you co-sign on a house, will you need to keep helping them with house payments? Ultimately it comes down to each person’s individual values and feelings on the matter.

In most cases, the client has already decided what they want to. We layout the options and risks financially, but it is up to them to decide on the values. They are looking to us to see if it is affordable and determine the best way to pay for it. Or, they are looking for us to validate that this is not a good idea. We are fine with our clients saying, “Our financial planner said this was not a good idea.”

Fairness. When there are other siblings involved, the idea of fairness can come up. We have built these things into estate plans where one child got part of their inheritance early for one of the scenarios outlined above.

What is most important to you? What do you need to do to live a fulfilling life? What is at your heart’s core? It really comes down to what is most important to you rather than what you ought to do. This really helps when it comes to making these types of decisions.

Lending money. Put it in writing with terms that you both sign. Otherwise, it is a gift. Think about how you want to be repaid and what that looks like. You can always forgive a loan, but if it is a true loan, put it in writing.

ProTip: If you think you might need money in the near future, your first call should be to your financial advisor.

No Judgement. Our philosophy as financial advisors is to never judge our clients’ values and what they think is important as to what to spend their money on. We don’t put our own values on your financial plan.

We all have families and each family has its own idiosyncrasies. Don’t be afraid to seek an objective outside advisor who can talk through not only the financial implications but also help you define your values and goals. You can also have your adult child meet with your financial advisor and get set up for success too.

This is one of those conversations that never really ends. Be open, have good communication, and get advice if you need it.

Contact us if you’d like to set up an appointment. Call us at 517-321-4832 for financial and retirement investing advice.

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

On this week’s edition of the Kitchen Table Podcast, Nick and I interviewed Molly Petitjean, an estate planning attorney with the law office of Buhl, Little, Lynwood, and Harris, PLC in East Lansing, Michigan.

On April 21, Molly will be presenting a webinar with us on estate planning basics.

Today’s conversation is a preview of that presentation. Estate planning is a complex topic that is often fraught with emotion and topics we don’t like to think about. However, Molly puts these things in terms that we can understand and act upon.

Listen in as we get Molly’s perspective on what estate planning really means, and what basics everyone, regardless of age, needs to address. Along the way, we talk about wills, trusts, powers of attorney, planning for non-traditional families, and choosing personal representatives.

Don’t forget to register for our webinar on April 21. Details to come.

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

Last week, the government passed the American Rescue Plan, which provided the third round of stimulus payments. This also includes enhanced child tax credits and unemployment benefits. These potential payments and tax credits all have qualifications based on income levels and provide some planning opportunities.

The bill provided stimulus payments, or “Recovery Rebates,” of $1400 per taxpayer and dependent based on certain levels of adjusted gross earnings.

The benefit phases out between $75,000 and $80,000 of adjusted gross income for single tax filers, $112,500 – $120,000 for the head of household filers, and $150,000 and $160,000 for married joint filers.

The income limits are based on either 2019, 2020, or 2021 earnings. There are three checks for eligibility:

The American Rescue Plan also provided enhanced Child Tax Credits for 2021. They are:

These credits also phase-out based on adjusted gross income at:

The benefit is reduced by $50 for each $1000 over the income limit. The benefit will be phased-in over the summer in monthly payments for those eligible beginning in July.

Note: These benefits CAN be clawed back if you exceed the income limits, depending on a safe harbor calculation.

The new law extended the enhanced unemployment benefits already in place through September of 2021. For 2020, the law made the first $10,200 of unemployment benefit per taxpayer tax–free subject to an adjusted gross income limit of $150,000 for all filing statuses.

IMPORTANT NOTE: For people who would qualify but have already filed 2020 tax returns, they should re-file to receive the additional tax benefit.

The following are things you may be able to do in order to maximize your benefits with the current American Rescue Plan.

We hope this has helped clarify some confusion and give you ideas on how to maximize these benefits for your particular situation. Still confused? Give us a call and we’d be happy to walk you through it. 517-321-4832

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

A Roth Individual Retirement Account (IRA) allows you to put money away long-term. If you follow the rules, your distributions during retirement are tax-free. If you are eligible to contribute to a Roth IRA, it can become a powerful retirement savings vehicle.

With a Roth IRA, you deposit funds that have already been taxed. You don’t get to deduct the contribution from your income as you do with a traditional IRA contribution. However, if you wait to take withdrawals until you are 59 1/2 years old or the account has been around for five years, whichever is later, the distributions are tax-free.

Traditional IRAs require you to begin taking withdrawals and paying tax on them, at age 72. However, Roth IRAs have no minimum distributions. You can let them grow tax-free during your lifetime and, if you are fortunate enough to not spend them, you can pass them on to your heirs tax-free as well.

If you need to take funds out of a Roth IRA prior to age 59 1/2 or before the account has been around for five years, the GROWTH (not your contribution) is taxed as income and is penalized 10%.

For example, You put $6,000 in the account this year and invested it. A year later, the account has reached $7,000 and you empty it out. Your original $6,000 would be yours to take, tax and penalty-free. However, the $1,000 growth would be taxed at your marginal tax rate and penalized. So you don’t necessarily want to put the funds in planning to pull them back out. But if you had to withdrawal your original contribution in a pinch you can do so.

Note: Under certain circumstances, withdrawals will be taxed but not subject to the 10% penalty. This includes:

To be eligible to make a Roth IRA contribution in a particular year, you first must have earned income. Second, for 2020, your modified adjusted gross income must be:

If you make more than those amounts, you can make a partial Roth contribution up until your modified adjusted gross income reaches $206,000 for married filers and $139,000 for single taxpayers.

Above those limits, you aren’t allowed to make a Roth contribution. For 2021 contributions, these limits all adjust upward for inflation. For single-filers, they adjust by $1000 and for joint-filers by $2000. See the eligibility charts below for 2020 and 2021.

Provided you are below the limits outlined above, for 2020 and 2021 you can contribute 100% of your earned income up to $6,000 per year if you are 49 or younger, and up to $7,000 per year if you are 50 or older.

A Roth IRA is a good idea if you are in a lower tax bracket (say 22% or less) and have excess savings or cash-flow that can be set aside for the long-term, like retirement. You are essentially “locking in” your current low tax rate in anticipation that taxes might be higher later in your life. In general, I would advise savers to contribute to their employer retirement plan to get all of their employer’s matching funds before saving in a separate Roth IRA (note also that many 401k plans now have a Roth option built into them). Since you can take your contributions back out at any time without tax or penalty, the risks of tying up the funds are relatively low. Keep in mind that these vehicles are best used for long-term savings.

If you anticipate that you will be in a lower tax bracket later in life, during retirement, you may be better off making a traditional, deductible IRA contribution instead of a Roth. That might also be true in years when your earned income is still low enough to allow for a Roth contribution, but some other circumstance, say investment income or a property sale, might put you in a higher tax bracket.

Any investment advisor or online investment company should be able to open a Roth IRA for you. You will need to provide your personal information, including your Social Security Number, to create the account. You will also want to name beneficiaries for the account in case something happens to you.

Once set up, you can contribute to the account however you see fit. Some clients prefer a regular, monthly contribution, while others prefer to deposit a lump sum. Since Roth IRAs are not generally funded directly from your paycheck, you can control the deposits. Note that you can make a contribution for a particular year up until you file your taxes for that year. So a 2020 contribution can be made up until April 15, 2021, or October 15, 2021, if you get an extension for your return.

Once set up, you can invest in just about any publicly traded stock, bond, or mutual fund, or even money markets and certificates of deposit if you open your Roth at a bank. I recommend diversified mutual funds as the best way to go for most clients. Because Roth IRAs are generally long-term investment vehicles, I encourage people to take some risk with their Roth IRA while young as extra risk should lead to better returns over the long-haul. When in doubt, Target Date Retirement Funds are often a good, simple choice.

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

How has the economy been impacted by Covid in the last twelve months?

It’s been 12 months since the markets first felt the impact of the global Coronavirus pandemic. It’s been a crazy year. The market, our lives, and our emotions have been on a rollercoaster. Nick and I put together a list of our favorite financial planning and investing lessons from the strangest year of our lives.

In the first few weeks of 2020, the stock market was pushing to new highs. The main concerns regarding the markets and the economy were that a trade war with China might escalate. Also, that inflation might begin to rise as the economy neared full employment. As news of the pandemic began to take shape, we witnessed one of the sharpest market – drops in history. This was followed by a rapid recovery as government intervention arrived to support the economy and the scope of economic damage became clear.

I’ve heard anecdotally from people who were able to time the market, getting out before too much damage was done, and getting back in before the markets fully recovered. However, none of these stories has equated to anything more than luck or a hunch. For every one of those success stories, we can point to others that didn’t work out nearly as well.

Covid forced us to think about what declines are like while the markets are good. Mid-March 2020 was not the time to be thinking about the risk level in your asset allocation. Your tolerance for risk fluctuations in your portfolio due to the market needs to be evaluated before you invest rather than in the middle of a sharp decline.

History shows that declines happen regularly, as do recoveries. Second-guessing your risk tolerance in the middle of a steep decline leads to bad decisions. Of course, for new investors, it is often difficult to understand the emotions an investor experiences during a decline until you have lived through one yourself. If what happened in early 2020 was new to you, take that into account and revisit your portfolio risk now that the market is stronger again.

I was an advisor during both the tech crash of the early 2000s and the financial crisis. Those slow, grinding bear markets tested the conviction of everyone involved. As I spoke with clients last spring, I expected much more despair and many more to want out of their stock holdings. I went into calls expecting I was going to have to do a lot of convincing to keep people invested. However, I found that most of the people with whom I spoke had already braced themselves and were willing to stay put. Part of that was the importance of other matters like our health and livelihoods took precedent over portfolio outcomes. But those conversations also revealed that many people had learned hard lessons in the past and knew the importance of staying invested this time around.

It is much easier to stay with an investment plan when you know that you have money in the bank to cover short-term needs. That includes having an emergency fund and money to cover things you know you need to do in the next 12-24 months. The emergency fund should be big enough to cover 3-6 months of expenses. An emergency fund protects against unforeseen disruptions to your income – disruptions perhaps related to a global pandemic.

Knowing that you don’t need anything from your investment portfolio makes it easier to ignore market downturns and wait for a recovery. Last year also underscored the idea of correlation when it comes to bad events: a loss of income due to an economic disruption will often occur while the stock market is taking it on the chin, making those safe emergency funds even more important.

Often, we spend money on things without giving a lot of thought to how that spending aligns with our values. Conversely, sometimes we feel guilty about spending money on something but shouldn’t because that expense is important to us. When the pandemic rolled in, and the economy shut down, we had to give up a lot of non-essential activities.

We sheltered in place without being able to travel for recreation, see friends and family, go out to eat, or attend theater and sporting events. Having to go without modern life’s extras helped us realize what we missed and what we didn’t miss. We saw financial planning goals shift to reflect an emphasis on families, as well as how we spend our time. This shift in focus usually occurs when a client is faced with a serious illness or a death in the family.

Many of the health issues arising from COVID-19 relate to underlying financial conditions. The strain on the medical system was obvious. However, we might just be scratching the surface of what Covid means for the health industry moving forward. Health costs were already rising at a much higher rate than inflation and that may worsen due to the pandemic’s pressures. There are many inexpensive preventative measures we can take as individuals to decrease future costs and complications down the road. If you invest in anything after living through the pandemic, your own health should be at the top of the list. Maintaining your physical health reduces medical expenses down the road.

What lessons have you learned in the past year regarding your healthy, priorities, savings, and investing? If you have any questions or concerns about your investments, give us a call today.

Get the most out of life. What is your vision for your ideal future? Creating a plan to accomplish your goals will give you peace of mind so you can do what is truly important to you TODAY, TOMORROW, and for however long you choose.

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

How do you make educated guesses on investing in new industries and which ones are going to pay off?

In the early fall of 2019, I got an email from a client asking whether Beyond Meat, a young company in the new “meat alternative industry,” was a good investment opportunity for her. The stock was all over the news.  The company just inked a deal with McDonald’s’ to feature their product in some new menu items. Beyond Meat stock, at the time of the article she forwarded to me, was up 11% on the news. Since then, the stock has been up and down and sideways (mostly down, but that’s not the point of this article).

This happens when competitors come and go, new versions of the technology emerge, and the market tries to figure out what meat alternatives might mean to the future of our economy.

Questions about investing in new industries come up a lot, in one form or another. The answer, from my point of view, is always the same regardless of what the new industry, technology, or company does. While there may be a lot of money to be made investing in new technology, trying to pick the right company out of the current pack of startups can be nearly impossible. Imagine trying to pick Apple or Microsoft out of all the fledgling computer companies spring up in random garages in California during the mid-1970s and early 1980s. Wikipedia has a list of those companies, which is sort of fun if you grew up in that era and may have been a bit of a nerd.

I believe that the markets are generally efficient. When we say that markets are efficient, what we mean is that a company’s current stock price usually reflects the average opinion of all the buyers and sellers out there. It incorporates all the known information about the company. That is true for new companies and industries as well. However, there is more room for traders to be wrong because there is less data available.

For Beyond Meat, the stock price the day before the McDonald’s deal was announced was based on the data that was available. Some people thought the stock should go higher based on their interpretation of the data, and they were buyers. Other people thought the stock price was too high based on the same data and they were sellers. When the McDonald’s news came out, the price immediately moved higher because the new data indicated the company may become more profitable than previously thought. Was an 11% move the right amount for the price to increase? Good question. Unless you’re an expert in meat and meat alternatives, and how that will translate into profits, your guess is as good as mine.

New companies and new technologies grab our attention. They make headlines and convey exciting improvements for our future. However, turning that into investment gains can be another story. One of those companies may eventually dominate the new industry, but most will fail. The new technology itself may fizzle out. When it comes to your financial future, I always recommend you stick with a broad-based approach to investing in the market based on the assumption that beating the markets is about discipline and diversification, not trying to guess the winners and losers.

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.

For our book club, Amy, Jeff, Nick, and I have been reading Changing for Good by James Proshaska, John Norcross, and Carlo DiClemente. This book was first brought to my attention by one of my instructors at Kansas State, Dr. Megan Lurtz, who wrote an article about how to apply the book’s teachings to the financial planning process.

Our team found the book extremely useful. Not just for financial planning but because it provides a great framework for how to change habits and make progress in life.

Whether you are trying to change financial habits or health habits, the authors break the steps of changing for good into six parts:

The key to understanding this framework is knowing that you can’t expect to move from one stage to the next until you are ready to make that move. Many of us try to go from contemplation to action, skipping preparation.  First, we have to completely convince ourselves that we’re ready to make a change. Most New Year’s Resolutions fall into this category: we simply decide that we should behave differently and arbitrarily try to stop on the first day of the year. Usually, we make this decision without truly committing to the depth of change it requires. By mid-January, we’re back where we started.

We highly recommend this book for anyone looking to make behavioral changes, whether those changes are health-related or financial.

Shotwell Rutter Baer is proud to be an independent, fee-only registered investment advisory firm. This means that we are only compensated by our clients for our knowledge and guidance — not from commissions by selling financial products. Our only motivation is to help you achieve financial freedom and peace of mind. By structuring our business this way we believe that many of the conflicts of interest that plague the financial services industry are eliminated. We work for our clients, period.

Click here to learn about the Strategic Reliable Blueprint, our financial plan process for your future.

Call us at 517-321-4832 for financial and retirement investing advice.