All Posts By

buhvdesigns

ETFs vs Mutual Funds | Why one over the other?

By | Investing, Investment Portfolio, SH&J Blog, Stock Market | No Comments

History of Funds

Humans have been investing for thousands of years, but the idea of “diversification” and pooling resources to spread risk is relatively new. The first modern day mutual fund in the U.S. was created in the 1920s. It was a way for investors to diversify their investment holdings with little capital. However, it wasn’t until the 1950s and 1960s that the mutual fund industry started to take off.

Prior to 1971, all mutual funds were “active”, meaning the investment manager could choose whatever stocks and bonds he or she saw fit. In 1971, Wells Fargo established the first index fund, which was built to replicate a certain index, not outperform it. It was a revolutionary concept that John Bogle mastered to build the largest mutual fund company of all time, Vanguard.

investment chart review

As indexing gained popularity, the first Exchange Traded Fund (ETF) was created in the late 1980s. The first ETFs were low-cost index funds that gave investors the ability to access cheap market exposure. The ETF industry has seen exponential growth since the Great Financial Crisis in 2008. Currently, there are over 5,000 ETFs that investors can trade, compared to roughly 1,000 ETFs in 2009. One of the most well-known ETFs, the S&P 500 Trust ETF (SPY), was created in 1993 and now has over $260 billion in assets.

Differences between ETFs and Mutual Funds

Why would someone invest in an ETF vs a mutual fund or vice versa? While there are many similarities between the two investment vehicles, there are a few key differences.

One of the key differences is how they trade. ETFs trade intra-day, just like a stock. This means that if you put in an order to buy an ETF, you have possession of the ETF as soon as the trade executes. A mutual fund trade will execute at the end of the day. At the end of the trading day, all the underlying holdings are priced, which then allows the mutual fund to be accurately priced. Therefore, you can only buy or sell a mutual fund at the end of the day, once the price is known. 

The vast majority of mutual funds are actively managed, meaning there is a manager making buy and sell decisions. Their goal is to purchase investments that may outperform the index in that asset class. Active management can be beneficial in inefficient markets, like bonds and international stocks, because a manager can identify opportunities and weaknesses. Most ETFs are passive index funds. Because mutual funds are more active, they typically have higher internal expense ratios than ETFs. ETFs are generally more tax efficient as well. If an ETF is an index fund, the turnover of the underlying funds is usually less than an actively managed mutual fund. This can cause ETFs to generate less capital gains distributions compared to a mutual fund.

At Sharkey, Howes, & Javer, we use a combination of mutual funds and ETFs. In certain markets, such as international stocks and bonds, we believe an active mutual fund manager can at times add value above and beyond the benchmark index. In more efficient markets like U.S. large companies, we think investing in ETFs provides a lower cost of entry to the stock market. Learn more about mutual funds and ETFs and how to implement them in your portfolio by getting in touch with us today for a complimentary consultation with a CERTIFIED FINANCIAL PLANNER™.  

Get in Touch

Inside the Economy: COVID-19 and the Economic Interruption

By | Economic Discussion, Economy, SH&J Blog | No Comments

This week on Inside the Economy, we continue to talk about the impact COVID-19 is having on the global economy. The U.S. government has interrupted the momentum of the economy asking American people to stay home. The U.S. has already injected liquidity of approximately 11% of GDP into the system. What will the final cost be? As some states gear up to start reopening certain parts of the economy, one thing is certain, there will be clear winners and losers. Tune in to hear more!

 

Inside the Economy: The COVID-19 Impact and Fed Reaction

By | Economic Discussion, Economy, SH&J Blog | No Comments

This week on Inside the Economy, we dig into the economic implications from the Coronavirus. Unemployment numbers have jumped up from their all-time low—how has the virus impacted the hiring process and what industries are seeing the biggest effects? We have seen highs and lows in the stock market this year. What is to come as we head into first quarter earnings season? We break down the CARES Act and how it reflects what the U.S. has learned from 2008. Tune in for this and more!

 

Q&A with Jacci Geiger, Realtor with Kentwood Cherry Creek

By | Investing, SH&J Blog | No Comments

Denver Real Estate Market Update

Q&A with Jacci Geiger, Realtor with Kentwood Cherry Creek

The influx of people moving to Denver over the last 10 years coupled with the diverse, local economy has created one of the most robust housing markets in the nation. Today, we interview one of the top real estate agents in the Denver area, Jacci Geiger. She will provide insight into Denver’s housing market during a time of historically low interest rates and uncertainties surrounding COVID-19.

Question: What is your outlook for the Denver Real Estate Market? 

Answer: Great question. To address it pre COVID-19, we started the season with a bang. As agents, we noticed the market “turned on” much earlier in the year than normal. We like to think our market is controlled by the weather and the school calendar, but if you recall, we had one of the wettest Februarys on record, and from January 1, 2020 until the present we have closed 13,619 houses. That is a fantastic first quarter!  Depending on the price range, we are seeing the market start to level off, which is healthy. I have written many contracts in the mid $500,000’s that are still seeing multiple offers. The luxury market, $1 million and above, is seeing more of a balanced market with less bidding competition.

Denver
Denver Real Estate

Question: What impact will Covid-19 have on the real estate market? Will it change the way sellers, buyers and agents interact going forward?

Answer: This is a tricky question at the moment. We have to adjust our way of doing business day-by-day, just like everyone else. Currently, real estate does fall under the critical category. People do need to move and that involves many other industries, such as inspectors, appraisers, movers, contractors, lenders, and title companies. I have been following many of the leading economists lately and they are all echoing the same sentiment: We came into this crisis with a very strong real estate market, the shorter the crisis, which they believe it will be, the more likely we will have a very robust 3rd quarter. This virus spread fast and made a big impact but may be gone before an actual financial recession, like in 2008. This was not caused by subprime loans, this is a pandemic. Yes, there will be some fall out, but no one at this moment has lost 30% of their home value. Home prices are holding strong. We are still in an active market here in Colorado.  

In regard to how doing business will change, like anything we are adjusting. I had three closings last week where the sellers were able to sign their documents by e-signature or at the windows of their own cars. I am hearing lenders are working towards remote signatures, as well. The title companies are asking agents not to attend closings and are only allowing two or three people in a room (of course with Purell on the table, a new pen and sitting 6 feet away from each other). Photographers are asking that we do not meet them at the property, but to leave all lights on because they will not touch the light switches. Many of these changes are good. It is about time we have all documents available online and signed via the internet.  It saves a lot of paper and time.  

As far as physical showings, we have seen a slowdown. A lot of them are now “Virtual Showings”. Vacant homes are much easier and more comfortable to show.  At my office, Kentwood Cherry Creek, we have put kits in each home with hand sanitizer, booties and have asked people not to touch doorknobs, handles, etc. There are now addendums we are attaching to contracts which allows more flexibility because dates might need to be adjusted based on the current circumstances. It is a new world and we are all adjusting. I do believe some of the changes will stick after this crisis is over and for good reason.

Question: In the greater Denver area, are there any neighborhoods or areas quickly developing?

Answer: Yes, as always there are the “up and coming” areas.  The first one is actually my neighborhood, Holly Hills. This is located off of Yale and I-25 and has homes built in the 1960’s, Cherry Creek schools, great lots, plenty of trees and the accessibility is amazing. I’ll run down a few more that readers can look into. A main factor is an easy commute to downtown or DTC, as those areas are getting too expensive to live in for some. People also look for walkability to restaurants, bars, retail, work out facilities, parks, etc. Some neighborhoods that are on the up and up are Villa Park, Elyria-Swansea, West Barnum, Sun Valley, River North, Globeville, East Colfax, Hampden, Walnut hills, Ruby Hill and Marlee.

Denver Market
Downtown Denver

Question: Is Denver a buyer’s or sellers’ market right now? In addition, what is your outlook for interest rates going forward?

Answer: Experts say to figure out if we are in a buyer’s or seller’s market, it is based on a 6 month inventory. In other words, if no more homes come on the market, how long would it take to sell the inventory? As of this minute there are 8,700 homes, single family, condos, etc. on the market and in the last 3 months we’ve sold over 13,000 homes and that was dead of winter! Therefore, it is likely we would have the 8,700 homes sold in no time, which makes it very much a seller’s market. 

Regarding interest rates, they are incredible right now. They have been all over the board, but that is starting to calm down. The CARES act was just passed and that should help that effort. I have closed several loans in the last month in the 3.25%-3.75%. These are great rates and they allow people much more buying power.

Jacci’s Final Thoughts:

The bottom line is, we came into this crisis with a very strong market and we will come out even stronger. I mean this metaphorically and financially. People are realizing how much their home means to them. Of course, this pandemic has created uncertainty and you should not put yourself in a risky position. However, if you are secure in your job, it is a great time to buy with great rates, less buyers to compete with and sellers that are ready to move. We are also realizing what matters to us most and are learning how to adjust our sails in a different direction with the new winds. Maybe this will be our finest hour. I know everyone in the real estate industry that I have worked with has been professional, careful and extremely optimistic that this too shall pass.

Market Insights & Commentary – March 2020

By | Investing, SH&J Blog | No Comments

Market Insights & Commentary – March 2020

The last three months have been a roller coaster ride of emotions for investors. At the beginning of the year, you could hear the ticking of the coaster’s wheels being pushed upward by positive GDP numbers, unemployment at a 50-year low and strong end-of-year earnings. Most market outlooks delayed a chance of recession to 2021 or beyond. Nothing could impede the slow, steady growth the economy was seeing—until COVID-19.

Wuhan, China reported its first case of Coronavirus in December of 2019. The markets seemed to stay stable and even climb to new heights as whispers of Coronavirus were heard around the world and cases started to spread to new countries. The roller coaster then hit its peak on February 19th and the downward track was steeper than expected. This is where rational thoughts began to be overpowered by fear and uncertainty.

In sharp market corrections, it’s difficult not to get weighed down by the great uncertainties during this unprecedented time. Many people’s daily commutes and hours spent with coworkers have been replaced with eerie streets and stressful grocery store visits. The endless news cycle about the Coronavirus makes it easy to lose sight of the “big picture”. However, investing is and always has been about your portfolio needs for the long-term. We know it’s difficult to maintain a long-term perspective during times like these, but we must remember that this too shall pass, and brighter times are ahead.

Our goal is to highlight some key questions we have been facing and re-center focus during this time of heightened emotions.

coronavirus investment chart
stock market crash chart

What Does This Mean for You?

Although sometimes it may feel like it, this market pullback will not last forever. The term recession has been tossed around a lot lately. By definition, a recession entails two consecutive quarters of negative Gross Domestic Product (GDP). We likely won’t know if this period of time will be classified as a recession until October of this year—and by that point we may have seen the worst of it. That is because on average, recessions span 11 months. We will continue to see volatility in the markets until the Coronavirus curve begins to flatten and the markets begin to regain confidence. We will not understand the true economic impact of COVID-19 until we know the severity and length of the outbreak.

Timing the markets is seemingly impossible but as history shows, once the markets rebound from the “bottom”, we can witness dramatic returns. The chart below illustrates the length and severity of several bear markets, followed by their 1, 3 and 5-year market returns.

SDJ investment chart

Source: A Wealth of Common Sense

That is why it is important to keep the focus on your long-term investment goals and try not to let emotions take control.

hundred dollar bill corona mask

What is SH&J Doing?

Heading into 2020, there were two investing themes: we were entering into the eleventh year of the longest running bull market and the U.S. has an upcoming election. Knowing election years tend to experience increased volatility, our Investment Committee worked to rebalance portfolios to be more defensive. All portfolios are unique and constructed to fit each client’s specific circumstances, however, one example of a defensive strategy that we have utilized is minimizing exposure to high-yield bonds, which tend to move like stocks in time of volatility. In the last few weeks, as uncertainty increased, another strategy has included decreasing exposure to small and mid-sized companies and international equities in portfolios when appropriate. In times of prolonged market drawdowns, these asset classes are usually hit the hardest and slower to recover. We will be looking for opportunities with the cash we raised as markets begin to stabilize.

What Should You be Doing?

The welfare, health and safety of our clients, employees and families are of the utmost importance to us here at SH&J. Please, take this time to embrace social distancing and prioritize you and your family’s health. We want to say a special thanks to our clients and their family members who are medical professionals, store clerks, and all those providing essential care to others in this time of need. Know that we are continually monitoring client portfolios so that you can focus on you and your family’s health and well-being.

Rest assured, our team is here for you during these uncertain times. We will be conducting business as usual, monitoring the markets and your portfolios closely. Our goal is to provide continued and uninterrupted service to our clients, while maintaining the safety and well-being of our clients, employees and families. We cannot wait to meet with you face-to-face again soon.

Inside the Economy with SH&J: Into the Unknown with COVID-19

By | Economic Discussion, Economy, SH&J Blog | No Comments

On this week’s Inside the Economy, we discuss the sharp contraction in the markets with the S&P 500 dropping more than 30% since its all-time high on February 19th. Although it looks and feels like a recession, what economic indicators signify a true recession and when will we learn if we are living through one? How has social distancing impacted the economy and what is the Federal Reserve and government implementing in order to help ease financial stress? Find out on today’s Inside the Economy.

 

Inside the Economy with SH&J: The Coronavirus Effect

By | Economic Discussion, Economy, SH&J Blog | No Comments

On this week’s Inside the Economy, we will be diving into how the Coronavirus outbreak is impacting the global markets. Will the recent volatility drive investors to safety or has this become a buying opportunity? Will there be a long-lasting impact on the global economy? The Federal Reserve announced an emergency rate cut in lieu of volatility—have we seen one-off rate cuts like this before? Low interest rates have homeowners flocking to refinance, but what is the effect on their bond portfolios? Cheap oil prices usually lead to increased travel, but this year jetsetters may be staying local. Tune in to hear all of this and more!

 

Planning for Retirement: Stock Exposure and Volatility

By | SH&J Blog, Stock Market | No Comments
investment chart review

Planning for retirement – Stock exposure and market volatility?

Preparing for and transitioning into retirement can be an overwhelming task. Over the last three decades, the responsibility to plan for retirement has shifted from employers to the employees and people are living longer, a lot longer. Most retirees will now have to make investment decisions on their own, instead of relying on a pension from their employer. So what is an appropriate amount of stocks for a retiree? The old adage of subtract your age from one hundred and that number is the percentage of stocks your portfolio should have, could be detrimental to your retirement plan.

What’s the best portfolio mix?

When people approach retirement the instinct is to get more conservative, or have less stocks in their portfolio. Every retiree’s situation is unique and people are living much longer, meaning their retirement savings will need to last longer. If people need their retirement savings to last longer, then growing their investments will be a necessary key to success. Many factors play a role in determining the best mix for you. Some retirees will rely more on the portfolio for income needs, while others may have more flexibility. Determining the best portfolio mix will depend on a person’s long term goals, risk tolerance and withdrawal needs from their investments.

older couple hike in woods
Senior couple embracing

How to deal with volatility in retirement?

When a retiree is relying on their investments as a paycheck, it can be emotional when stock markets experience volatility or have huge fluctuations. Investing comes with risk, but not all stocks are equally risky. Retirees can use many different strategies to try and lower the overall risk in their portfolio while still maintaining a certain expected return. In today’s investment arena, low volatility ETF’s are accessible. These funds try to invest in stocks that have less risk than the broader market. Another strategy may be investing in companies that pay a dividend. The dividend helps provide income regardless if the stock is up or down. When relying on a portfolio in retirement, it is important to balance both growth and risk.

Planning and investing for retirement is challenging. If you need help determining the best mix in your investment portfolio for your retirement plan, take advantage of Sharkey, Howes & Javer’s complementary consultation.

Inside the Economy with SH&J: Economic Report & Virus Update

By | Economic Discussion, Economy, SH&J Blog | No Comments

On this week’s Inside the Economy, we take a look at the economic data which continues to slow. Is the coronavirus to blame or are other factors impacting global growth? The U.S. stock market is fully valued based on price to earnings ratio. Does this mean the market has reached its ceiling, or will momentum carry prices higher? In other economic data, job openings are trending lower. Tune in to find out more on this week’s Inside the Economy.

 

Inside the Economy with SH&J: Coronavirus and Municipal Bonds

By | Economic Discussion, Economy, SH&J Blog | No Comments

On this week’s Inside the Economy, we discuss the world’s safe haven. When countries become fearful or need a safe place to put their money can you guess where they go? Hint: it is not the country currently dominating the headlines for the Coronavirus. Speaking of the Coronavirus, this week we examine the historical impact of world epidemics on the global stock market. The results may surprise you. Last but not least, we will highlight a sector of the bond market that is in high demand, municipal bonds. Tune in to learn more.