Investment Newsletter

Googins Advisors Inc.

November 1, 2022

 

Accept financial medicine like you accept medical medicine

Rising interest rates are the medicine.  The government is now attempting to apply the medicine to cure the inflation. The medicine worked in the early 1980’s as Reagan supported Volker, the Fed chairman who pushed interest rates into the high teens until inflation fell and the stock markets rose.

Never having been one who thinks either low or high interest rates are good for the country, but feeling sympathy for the savers who earned nearly nothing on their savings for years, it seems fair that they are now earning a higher return on their deposits. Is there an average interest rate that could be good for the country if kept “stable”…and be fair to both the owners and the loaners?

Owners buy businesses, stocks, real estate, gold. and other commodities. Owners may wear two hats,  as owners but also debtors if they borrow to run the business.  The owners create the economy; government and the people gain from business’ success.

The stock market is like the little train that “thinks I can… I think I can…” and makes it up the hill.  It does not go straight up and sometimes we get false hope as the market rises for several days and then falls back again.  The seasoned investor has lived through this whiplash many times and retains his confidence because the stock market as measured by the S&P 500 Index has never failed to recoup the losses sustained in a bear market.  Never.

The stock market or markets have proven themselves time after time.  Some more statistics to remind you of the power of the stock market.  Declines averaging 5% or more happen about three times per year, 15% or more about once every three years, and 20% or more about once every 6 years. Capital Group – A guide to market fluctuations   Declines are natural but so are recoveries and the recoveries give back more than they took for a time.

Rolling 10 year average annual returns for the S&P 500 since 1937 to 12-31-2021 has been 10.57%.  Don’t let emotions cloud your judgment!  Win! with the stock market.  Warren Buffett says “The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.”

How long must I wait? As long as it takes!

 

ETF’s and Capital Gains

We doubt the realized capital gains will be as large as they were last year but there is something you can consider.  Capital gains are not taxed as heavily as ordinary income, but they are taxed.  Recently the government made changes in the rules governing ETF’s.  ETF’s do not need to pay income taxes on capital gains declared within the account; they only pay on a capital gain shown upon sale of a part or the whole ETF. We believe investors can benefit from this strategy; it involves checking the gain taxed on the sale of mutual fund shares to shift to an ETF and then investing in an account equally well managed.  Call us if you would like to consider this strategy so we can list the pros and cons.

“The average manager can’t beat the index, but not all managers are average!

 

Do you know anyone who could use retirement planning or investment advice?  Tell them to give us a call we would love to help.

 

 

Sincerely,

 

 

Louise Googins, President, Investment Advisor

Michael Googins, Administrator

Kim Rankin, Accountant

Richard Martin, Investment Advisor

Lynne Goldsmith, Investment Advisor

Dayton Hoffmann, UW-Madison Intern

Andrew Spengler, UW-Madison Intern