You know your goals and what you want to achieve from your hard work and discipline. But do you know how to assess your risk tolerance in relation to the market's volatility? Do you know the best things to do with your finances? Balancing these aspects on your own can come with some challenges in today's market.
You’ve probably heard lots of talk over the last few months about a recession and the question of whether we are heading into one or not. Do you know what you should be doing in the meantime?
Whether you are just starting on your financial journey or looking to fine-tune your existing plan, at Park City Wealth Advisors, we want you to have a solid plan in place when it comes to navigating your finances.
In this blog, Park City Wealth Advisors will talk about all things "recession" and offer some insight into managing your finances in today’s market.
What is a Recession and Things to Do with Your Finances.
To start, what is a recession? The National Bureau of Economic Research, or NBER, defines a recession.
The Unofficial but most commonly recognized definition of a recession is two consecutive quarters of negative GDP growth. GDP is defined as the aggregate sum of consumption, investment, government spending, and net exports.
Since 1980, GDP growth has been negative, or the economy has been in recession just 12% of the time.
Officially, a recession is defined as a non-profit, non-partisan organization known as the National Bureau of Economic Research is the official arbiter of the nation's business cycle.
NBER defines a recession as: "a significant decline in economic activity that is spread across the economy and that lasts more than a few months."
Criteria for analysis includes personal income, employment, retail sales, & industrial production.
What To Do With Your Finances At This Time
During our Quarterly Market Update, Founder of Park City Wealth Advisors, Morgan Lemaitre, shared that:
"Historically, by the time the government officially declares a recession over, it’s 15 months after markets have bottomed and the stock market has seen a 61% recovery. If you wait to invest until the recession is over, you will have most likely missed A LOT of the stock market upside."
So, what can you do with your finances at this time to not miss out?
Right now is the time to move your savings and cash balances into U.S. treasuries.
U.S. treasuries are trading at over 5% right now. You can lock in this percentage for different periods of time, depending on your goals, for example; three months, six months, one year, or two years. When you lock in your savings and cash balances at this time, you will see your money start to earn some real interest!
This has also been a hot tool with corporations looking to maximize their operating income. Rather letting 6 months of operating income sit in cash in a checking account, why not let it earn some interest and invest what you don’t need to operate your company for the next 30-60 days into a US Treasury Ladder- this is where we stagger out maturity dates so cash is always coming due.
Short Term Treasury Bond Ladders
If your business keeps one to two years of operating capital in your bank accounts, you should really consider a short term treasury bond ladder. These notes are paying between 4 and 5% interest. This is a lot more than your everyday savings account. Let’s not leave money on the table!
In a high interest rate environment CDs can also be a good tool to utilize. A lot of folks think that you need to go to a bank to buy a CD. However, that’s not at all the case! A great financial advisor can buy institutional CDs for you to hold in your portfolio. So rather than running around to lots of different banks to open up accounts and lock up your money, hit the ‘easy’ button. Talk to your advisor about CD options that can get you similar returns, all be held in one account, and keep you from doing lots of paperwork and driving around.
How a Wealth Advisor Can Help
Working with a wealth advisor can bring you peace of mind in knowing that an experienced professional has your best interest at heart.
A financial advisor can bring your finances to the next level. We bridge the gap between your knowledge and goals and the understanding of the market’s volatility and patterns. The experts at Park City Wealth Advisors are committed to ensuring our clients long term financial success in order to maintain and protect their lifestyle, no matter the circumstance.
At Park City Wealth Advisors, we believe that having a well-established financial plan is crucial in times of uncertainty, whether you are starting out or seeking to solidify your current strategy. Contact us today to get started!