A couple of weeks ago, I talked about the fact that, in our office, we use the first couple weeks of the new year for goal-setting and preparation for the 12 months ahead. Now, we're full-swing into the first round of quarterly client meetings, and we love getting to see all of our valued client families and help them kick off a new year.
As we review your portfolio's performance for 2017 and fast-forward into the first month of 2018, one thing I'm repeatedly asked is whether or not we actually pick the individual stocks in our Envestnet models. I want to reiterate that yes, we do. If you are in Envestnet, whether the income model, the non-qualified accounts in models 1-8 or the qualified accounts in models 11-18, each and every position in those accounts is hand-selected by me. We do have an investment committee that meets and discusses these, so every advisor on our team can answer any questions you have. But, at the end of the day, the weight of those decisions lies solely on my shoulders, and that's not a bad thing.
As most of you know, I love the stock market. Having gone through multiple stock market corrections, I'm also a big believer in knowing what you own. It takes the panic and emotion out of the equation (or at least reduces it!) when there is a correction. For example, if we were to experience a correction, you might be concerned, and that's normal. But none of you would be freaking out about the fact that you own Amazon, Google (which owns YouTube), Kroger, Facebook (which owns Instagram) and Paypal (which owns Venmo, which your kids and grandkids use to pay each other and merchants). Those are just a few of the companies in our models, but I know you've heard of them. They're companies most of us use on a daily basis, and they're all companies that have the ability to charge pretty much whatever they want, and we'll pay it, because we use them on a daily basis. Think pricing power.
So yes, we do pick the stocks in your Envestnet portfolios, and we follow each company closely. I would be more than happy to talk to you (at great length!) about any of these, or any other new investments you'd like to make.
Now, for those of you who are still scared of the stock market, no matter what I say, after getting burned back in 2008 or '09, and you're keeping your money in bonds, CDs, or buried in the backyard, I understand the conundrum you're in. First, you missed out on one of the greatest market runs in history by getting out at the wrong time. But let's ignore that. You definitely don't work with us, because you'd probably have gotten back in by now. The bigger issue is that, with the Federal Reserve raising rates, bonds may continue in what I like to call Bond Armageddon. For those of you not holding your individual bonds to maturity, or who own them in mutual funds where many bonds are not held to maturity, while you are receiving a small yield, your bonds continue to drop in value, and opening those statements isn't much fun these days.
For those of you who have CDs at your bank, while I acknowledge that there is a time and place for CDs, now may not that time with rates what they are. Just scanning the local paper this week I see rates of 1.54 percent APY (annual percentage yield) at Central Bank, 2.15 APY at South Central Bank and 1.4 to 1.8 at University of Kentucky Federal Credit Union for 12- or 18-month CDs.
Folks, we have short-term income accounts available that are liquid (meaning you don't have to hold it long-term, or even for a year). Yes, there could be some movement in your portfolio, and it's not exactly the same as a CD, but it may be better than Bond Armageddon, and a heck of a lot better than that cash in your wall or your yard that's either rotting or being eaten by rats. (Did you know that the infamous drug cartel boss Pablo Escobar actually lost about 10 percent of his profits to rats and rot?
No? Well, I digress.)
The point is that if you still own CDs or keep a lot of cash, you might want to come in and talk to us, not about the stock market, but about being a better steward of your current cash-like assets. We're always here to help, and the coffee is always hot. #dontfeedyourcashtorats