Whipsaws, Whiplash, and Algos

Whipsaws, Whiplash, and Algos

After living through the worst quarter (Q4 2018) since 2011, we just experienced the best start to a year since 2012, with the S&P 500 Index up +13.5% and international equities up +10.3% in Q1 2019. As recently as December 2018, the S&P 500 Index was down -20.2% (peak-to-trough, 9/20/19- 12/24/19), and the threat of moving into a global recession loomed large.  In other words, the first quarter was almost a mirror image of the fourth quarter.

What triggered equities to drop to bear market levels then to abruptly – and I mean abruptly! – reverse?

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Let's Get Real about Real Estate

So you want to buy a house? Just make sure to take the time to make sure it’s your dream home—not a financial nightmare.


Let’s bust some myths about real estate, shall we?


Myth 1 – “Renting is throwing money away. I could own a home for the price I pay in rent.”


This qualifies as a half-truth. The trick is understanding the amortization of the loan payments over time. When you pay your mortgage, a portion of that money goes to principal and a portion goes to paying the interest on the loan. At the beginning of the loan, most of the payment go towards interest, so you are not building equity. The break-even point, when your mortgage payment begins to accelerate in paying down principal, is approximately 5 years. If you’re unsure if you will stay in a home or an area longer than five years, consider renting until your situation is more stable. While real estate prices have typically outpaced inflation, like all investments, no returns are guaranteed, and real estate values, just like stock market prices, can go down.

 Myth 2 – “Owning a home is a pain in the neck – and very expensive! I’d rather let a landlord handle it.” 

When you own a home, you have to be your own landlord and maintain your home.  Owning your home gives you a lot of flexibility (purple cabinets and orange walls!), but it can also be a hassle (the toilet is leaking, again)! The easiest way to manage this is to set aside 1-3% of your home’s value annually to cover regular maintenance expenses and larger replacement costs (i.e. new roof, HVAC, or appliance replacement.)  So for a $350,000 home, this would equate to $583 - $833 per month. Stash this away in a separate savings account so you won’t be caught off-guard by the expenses.

 Myth 3 – “Your pre-qualification is your budget.”

When the lender approves your loan, it is based on your debt-to-income ratio. Different banks allow different levels of debt-to-income percentages. Just because you are approved for a $1 million home doesn’t necessarily mean it is right for your budget. Dive into your numbers with a fee-only financial planner. She can help you assess your mortgage payment in the context of your larger financial picture (retirement, college savings, etc.)

 Myth 4 – “Downsizing is a great way to fund retirement.”

 As time goes on, your home can become one of your largest assets – particularly if you have lived in your home for years, and have significant equity.  Downsizing is a common strategy these days to help retirees live the lifestyle they envisioned, enabling them to realize a significant amount of equity.  But is it right for you? There are a few considerations. First, transaction costs can eat into your profits on the selling side. If you would like to stay in the same area, realize that homes have appreciated at approximately the same rate as your residence and that the price per square foot often rises as the square footage decreases. Finally, consider renovations as a way to make your home suit your needs into retirement.

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For first time home buyers, knowledge is power. If you understand the steps of the home buying process, you’ll be prepared to choose the right home for your current and future lifestyle. Teaming up with professionals in their fields can set you on the path to financial stability and give you a leg up on the property ladder.

Who to consult with first?

Step 1 – Meet with your financial advisor. If you don’t have a trusted financial planner, look for one who is fee-only and adheres to fiduciary standards. They can help you see your home purchase as a part of your overall financial picture with respect to your job stability, life plans, and current budget.

Step 2 – Contact a loan officer to secure a pre-qualification letter up to the budget you’ve discussed with your advisor. They’ll be able to tell you what documentation you need to gather and explain different mortgage products and programs to help you make an informed decision. Better yet, go all the way to a pre-approval letter, which is a more rigorous process but makes you a more appealing buyer.

Step 3 – Find a real estate agent and search for your dream home. Licensed real estate agents are a wealth of information about neighborhoods, home features, and  the contract process.

Then…and only then… unlock the keys to your dream home!

What's Your (Money) Relationship Status?

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It’s time to have a talk. The “what are we doing here?” talk. But this time, instead of sitting down with your significant other to talk about your relationship with each other, it’s time to have “the talk” about your relationship to money. We understand that everyone has a different past, personality, and approach to handling their finances. The more you come to understand the motives and values  that guide your money habits and tendencies, the more intentional and mindful your overall approach will be. And that’s what we want for you, to be intentional with your finances, and to be inspired to live your values.

 Party of One

If you’re single, consider it a gift! You are in full control. Empower yourself by getting intimate with your spending habits. Have a date with your budget by pouring yourself a glass of wine and doing a deep dive into where your money goes. Look at the last three months' worth of transactions to figure out what your average monthly spend is per category; then go a step beyond the awareness to ask yourself how you feel about those numbers. Do any of them need to shift to get your spending more in line with what you value (and what you're trying to save for)? Set new spending goals and reward yourself with a box of chocolates if you can reach them.

 Newly Attached

Congrats! There’s no better time to talk money with your honey. It’s important to learn their money personality type and start planning for how you’d handle your finances in the next step. Try taking a money personality quiz together and sharing some numbers: credit score? Total debt? Monthly savings?  If you’re coming up against some friction, take note and try a compassionate, empathetic posture. Remember, personal finance is personal.

 Together Forever

That’s wonderful! Married folks have plenty of advantages when it comes to sharing their finances. Tax advantages and no more “going Dutch”. Maybe you've already had a money talk, but over time, relationships - and goals - change. Early in life, your goals may be focused on paying off student loans. Your 30’s and 40’s will likely be focused on paying for your kids’ education expense. By the time you are in your 40’s and 50’s you will likely have enough disposable income to invest more in retirement.

Schedule a “money date” once a month to check-in with your honey about goals, and to see if your actions are in alignment with meeting your goals. Other considerations: maybe your tolerance for risk in your investments has changed as you start to consider retirement; maybe you need to update your estate documents; maybe your life insurance needs have decreased.

Setting a date to reassess your situation can go a long way in bringing you back into sync with one another. And start the conversation with shared goals, rather than with the budget, because shared goals are often easier to agree on!  

No matter what stage your relationship is in, we’re here to help!

Roberta Keller

Alexis Advisors is a fee-only firm offering financial planning and investment advisory services. We work with families, women and businesses to integrate their personal and social values with their financial goals. We are one of the few independently owned and operated financial advisory firms, with no dealer group or corporate associations that require us to revenue share or meet sales goals. This means that we have the flexibility to operate with complete transparency, fewer conflicts of interest, and in your best interest. 

Dead Cat Bounce, Or Bull Market?

Dead Cat Bounce, Or Bull Market?

A “dead cat bounce” is a temporary recovery from a decline in equity markets. Downtrends are interrupted by brief periods of recovery — small rallies — when prices temporarily rise. The term is based on the notion that even a dead cat will bounce if it falls far and fast enough.  

I know – it’s a terrible analogy, especially for cat lovers like myself. But it’s a well-known term in the industry, and likely apropos to what has been occurring in equities over the past few weeks.   

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The Cost of Chasing Money

The Cost of Chasing Money

I’ve worked in the financial services sector for most of my career. For big and small companies, from Wall Street to London to Richmond. The same theme emerges over and over again: Money is not about money – it’s about desire.

We all have painful patterns around money, desires we think money can help us achieve, and money fears and insecurities. But over-spending, over-working, accumulating debt, avoiding reviewing our investment statements – these are just symptoms of a deeper need or desire. 

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Global Equities Taking a (Big) Breather... What's Next?

Global Equities Taking a (Big) Breather... What's Next?

Recent selling has been relentless, with the S&P 500 index down -8.7% since the start of October, and about flat for the year. The index remains on track for its worst month since 2010. Global equities (US and international) have lost almost $8 trillion of value this month, and is set to be the biggest wipe-out since the height of the financial crisis a decade ago.

A bear market is defined by most as a decline in equities of 20% or more. Many are asking, are we heading into a bear market?

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