Investing Under a Potential Biden Presidency

WRITTEN BY: VANCE HOWARD & WILL STARK

In most people’s minds, the outcome of Presidential and Congressional elections determines the direction of public policy for the next handful of years. It seems that this year, the outcome of these elections holds far greater weight than just legislative changes. There is increasing uncertainty about whether a clean result will even be generated, let alone what the impacts of those outcomes are. While the outcomes of these elections are not always straightforward, we at Howard Capital Management, Inc. would like to offer a few key trends that investors can use to potentially profit from a shift in power.

Cyclical Outperformance

Based on historical market trends, cyclical sectors tend to perform slightly better during Democratic regimes. The themes for 2020 and the next 2-3 years are likely to continue in the direction of cyclical sectors like Technology, Consumer Discretionary and Energy while the US economy is in a recovery phase. However, if a “Blue Sweep” were to occur, we wouldn’t be surprised to see a broad market selloff. These reactionary selloffs are usually prompted by increased regulatory and geopolitical uncertainty, of which we seem to have no shortage of recently.

There is also tremendous uncertainty surrounding the Energy sector and whether a Biden Presidency would add or detract from that sector. Generally, when we see peaks in uncertainty there is a subtle correlation with positive future returns. We must consider the possibility that, if we see a Blue Sweep the “Green New Deal” policies have a chance of being implemented earlier than expected. Thus, renewable, and sustainable energy sub-sectors could seek to benefit from this regulatory initiative. For Energy specifically, it’s currently plowing through its third-lowest support point since the bottom in late March. It’s far too early to tell which way the sector will go, but it’s a sector that could show tremendous promise in the next 18-24 months.

Technology has held up extremely well through 2020 and considering how COVID-19 will affect the working world for the foreseeable future, we maintain the view that Technology will continue its relative outperformance of other cyclical sectors. While most are concerned about extended EPS ratios, anti-trust suits, regulatory probes, etc. the investors that have ridden the Technology wave through 2020 have profited greatly. Whether it’s time to take gains off the table is something else investors should ponder. Biden has explicitly stated he will raise the capital gains tax to the ordinary income rate for those earning more than $1mm.

Contrarian View

The outcome of the Congressional elections is as important – if not more so – than who is sitting in the Oval Office in January. The probability of a “Blue Sweep” brings far more uncertainty to the markets than a Biden presidency and mixed Congress would. Two of the worst scenarios for market growth historically occur with a Democratic President/Mixed Congress or Republican President/Mixed Congress. Contrary to popular belief, a gridlocked Congress is relatively stable for the markets as they know exactly what they’re getting, nothing.

What Can I Do Now?

Knowing that volatility is expected to rise over the coming weeks, what are investors to do? Our simple answer: Do not make knee-jerk reactions on your own and trust the professionals and systems they have developed to withstand whatever may come to pass. At the end of the day, a contested election result is not a given; a decisive result is also not a given but is certainly possible. They key now is to remain focused on what you can control: your emotions, your strategy, and your goals.

Howard Capital Management, Inc. has seen uncertainty come and go. The only things we can say for certain is that the HCM-BuyLine® has been aiming to mitigate downturns for clients since 1997, and we will continue to respect and implement its decisions. Regardless of how events unfold, we must be strategic and tactical to bring our best defense against a market that does not think or feel.


Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


The Current COVID-19 Economy

Everywhere we look articles mention an impending “new normal,” and through our masks we respond that we are braced for one. In this economy, there are many sides to the COVID-19 story. For many, 2020 was a year worth waiting for; school, big travel plans, attractive stocks, mergers, tech innovations; you name it. However, all the anticipation for a great year came to a screeching halt, and these past few months have not been easy on anyone.

Due to financial strain, the average American has experienced cutbacks in spending, leisurely activities, and socialization. Once the world begins to establish its new normal, the economy is expected to slowly creep into a new type of luster. Although the pandemic has thrown the economy off course, small businesses, stocks and technology are using these times as a way to brainstorm new innovations and remain optimistic.

 
SMALL BUSINESSES

Small businesses that do not fall under the “essential” category have experienced a unique type of hit during the COVID crisis. Many retailers maintained the ability to sell online, which did not require those businesses to create any model changes. However, with the economy coming to a halt, consumers are generating less earnings than usual. Boutique retailers supply a mixture of high-end, bespoke, or specialty lines. Without customers or events, funding is sure to see an unprecedented dip. Mom-and-pop shops are not usually household names, which often put them at the backburner of consumer’s minds during uncertainty. What seems to be swept under the rug is the fact small business operation is a key component to the economy bouncing back, as they make up 40% of total business revenue.

Restaurants supply takeout or delivery, but again with consumers earning less, they have less to splurge on dining experiences. Even though restaurants are still operating and serving, alcohol sales always add to restaurants revenue. Seeing as curbside doesn’t also mean bar-side, restaurants are sure to experience a dip, as well.

When people aren’t earning, they aren’t spending. As unfortunate as this is, it could lead to small businesses functioning higher through online services, orders and deliveries. As social as humans are, survival comes as a higher priority. Events and gatherings inspire spending, and until larger gatherings trend again, goods may sit on the shelves for an unpredictable amount of time.

In part of these occurrences, workers around the globe are reallocating their time as well as their efforts to lock in a more secure future. If this pandemic has taught us anything, it’s that we have savings accounts and assets for a reason. 

 

STOCKS

To say stocks are struggling right now is an understatement. The United States implemented a stimulus package over a month ago, and Japan and the European Union are sitting on their own stimulus packages. Investor confidence is at a new low, however, their market holdings are at an all-time high. Compared to 2009’s $2.5 trillion in market holdings, 2020 is looking at around $3.2 trillion. As of May 20th, money market assets are at $4.8T, which is an all-time high for institutions and retails. Which instils an optimism easily forgotten by the average broker. 

 

The month of May launched with the S&P 500, Russell 2000 and Nasdaq 100 down roughly 15%, 29%, and 4%. The Russell 2000 is in accordance with small business numbers, and the deterioration is unavoidable. On the inverse, through Nasdaq 100 we see tech companies are faring just fine. Small business breaks a real sweat, but tech doesn’t need as much footwork. Ergo, the tech industry has already hit the ground running through this pandemic, and it’s going to gain more traction as the world reopens. Innovation is regularly snatched up and utilized to ensure business runs as quickly and efficiently as possible. In addition, for all the gamers out there, enhancements in experience have been on the up rise as well. 

 
GOODS AND ENTERTAINMENT

These past few months have roped the world into an entirely new “work from home” culture. The average worker is commuting less, taking a look around their living space, and making improvements. The words “improvement” and “self-care” have become both marketing tools and triggers simultaneously. The “self-care” industry is, for lack of a better synonym, booming.

Social media has been flooded with posts and promotions regarding skin care, fitness, nutrition trends, and home improvement, allowing marketing messages to touch more consumers throughout the day.

Consumers are easily bored by nature and are always reaching for something new to occupy their minds. The film industry is at an unnatural standstill but is absolutely anxious to return to work. Pre-production practices and deal making is still in full swing, however physical production and animation studio procedures are facing new restrictions. When physical production is available again, there’s no doubt the leading streaming services will be overwhelmed with new material by 2021. However, for now, entertainment circulates through YouTube channels, Instagram Live, Facebook Live and good old-fashioned news outlets as filming can be done from home by the show hosts, celebrities and influencers.

 

TECH’S “HANDS-OFF” EVOLUTION

Internet technology has already experienced shifts in previous years due to digitization. Mediator software and video conferencing applications such as Zoom, Google Hangouts, Microsoft Teams, etc., have risen in popularity simply to enhance convenience. These next few months, maybe even years, might prove further digitization due to sanitary reasons. Meetings would be quicker and easier to maintain if the majority were moved to virtual modes. When working from our private phones, tablets, or computers, direct human contact is unnecessary, thus creating a cleaner work environment. 

Small business owners are also using technological innovation for product launches, promotions, webinars, increased online presence, and even seamless check outs. The platforms that business owners use today, like Shopify, Woo Commerce, Square Space are designed to be intuitive and extremely user friendly, making it easier than ever to buy and brand products as well as communicate with consumers and audiences.

As communication and transactions transition to online interaction, the medium platforms will experience higher security enforcement to combat hackers. Moving everything online is risky business since data can be lost or stolen by a few carefully crafted codes. Consumer’s minds will need to be at ease by implementing higher online security when maintaining their assets. 

 

EXTRA PLANNING IS THE NEW NORMAL

Any consumer or worker has been posed with a blanket question of, “What if?” So far, 2020 has been a year of issues which require solutions. Now owners, workers, and individuals are on a constant hunt for solutions. Watching devastation and a plummeting market has left people afraid for their future, but even in fear and frustration they are fighting for security while remaining hopeful.

Resources:

Market Watch: https://www.marketwatch.com/story/stock-winners-and-losers-in-the-post-covid-19-work-from-home-world-2020-04-24

Barron’s: https://www.barrons.com/articles/stocks-in-a-stalemate-as-s-p-500-remains-stuck-at-3000-51590598725?mod=hp_LEAD_1

Barron’s: https://www.barrons.com/articles/americas-small-businesses-are-sputtering-why-that-matters-for-the-economy-51590141602


Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


What the Cares Act Means for the Economy

In a unanimous vote to support individuals, businesses and hospitals from the distress of Covid-19, the CARES Act, or the Coronavirus Aid, Relief and Economic Security Act, was signed by the President on March 27, 2020, making the 800 page bill and $2.2 trillion economic stimulus package the single largest relief bill in U.S. history. The CARES Act is meant to be a helpful response to this pandemic, but the aspects of the bill are intricate with many key takeaways to understand.   
How the largest components of the stimulus package have been roughly allocated:
  • $300 billion – One-time cash payment [tax rebates] to eligible taxpayers if filed a 2018 or 2019 tax return
  • Single taxpayer: $1,200 (incomes up to $75,000-$99,000)
  • Joint taxpayers: $2,400 (incomes up to $150,000-$198,000)
  • Children: additional $500 per child (under the age of 17)
  • $260 billion – Expanded unemployment insurance to expand eligibility and offer workers an additional $600 per week for four months
  • $376 billion – Small business relief through the SBA (U.S. Small Business Administration) for companies with 500 employees or less to prevent layoffs and business closure and maintain payroll for up to 8 weeks of cash-flow assistance
  • $349 billion for the Paycheck Protection Program, PPP, allows the SBA to make forgivable loans up to $10 million for coverage of employee salaries, paid sick/medical leave, insurance premiums, mortgage, rent and utility payments
  • $27 billion for relief through the Economic Injury Disaster Loan (EIDL) emergency advance, and additional new loans and grants for small businesses
  • Additional business tax-credits and payroll tax breaks are available; however, they are not available for businesses who secure PPP
  • Business payroll tax can defer their employer portion, half being due on December 31, 2020 and the latter half December 31, 2022
  • $500 billion – Expanded lending for large businesses and local governments
  • $46 billion is meant to assist aircrafts, air cargo carriers, and national security
  • $454 billion in Federal Reserve lending to support other businesses, non-profit organizations, states, and municipalities
  • $150 billion – Coronavirus Relief Fund to States, Territories, and Tribal governments for public health emergency expenditures (min. $1.25 billion for small population states)
  • $153 billion – Supplemental funding for community and private health systems, Medicare and telehealth will see an expansion
  • $100 billion for hospital assistance (to include expense reimbursement)
  • $27 billion for vaccine development, treatment, expanded Covid-19 testing, medicine and supplies (ventilators and masks)
  • $20 billion for veterans
  • $4.3 billion for the CDC
  • $1.3 billion for community health centers
  • $49 billion – Agriculture and nutrition programs
  • $45 billion – FEMA
  • $27 billion – Elementary, secondary and higher education 
 
Who Provides the Loans?
The Secretary of Treasury has the authority to provide loans or guarantee loans to states, municipalities and other eligible businesses. A variety of regulations have been loosened against prior legislation imposed through the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Economic Stabilization Act of 2008, and others. 
What Does This Mean for Retirement Plans?
Distributions: Coronavirus-related distributions for qualified retirement plans will not be penalized by 10-percent early withdrawal penalty (591/2 for IRAs, 401(k)s, 403(b)s). Distributions may be made up to $100,000 made on January 1, 2020 and thereafter. The funds will be taxable up to three years and the taxpayer may contribute the funds back to an eligible retirement plan within three years to avoid taxes. Required Minimum Distributions (RMDs): RMDs are suspended for the calendar year for 2020 for defined contribution plans and IRAs.
What is the Defense Production Act?
The 2020 stimulus bill also expands the Defense Production Act, which is an initiative meant for building defense equipment for military purposes. The CARES Act offers a two-year period where the government may exceed the $50 million expenditures limit and correct any shortfall production experienced during the pandemic. 
The Response to the Stimulus Package
The Senate and the Congress passed another bill for $484 billion, adding $310 billion of new funding for the SBA’s Payroll Protection Plan (PPP). Of that, $10 billion has been allocated for Economic Injury Disaster Loan (EIDL) and $50 billion to boost the small-business emergency grant and loan program. Agriculture will be defined as a small-business, and some of the money will be earmarked for banks with less than $50 billion in assets. $75 billion has been added to the $100 billion in the original CARES Act for hospitals and $25 billion is included for testing ranging from grants to states and CDC and NIH for research and development. Moving forward, Congress is likely to shift from crisis relief to economic stimulus. The total unemployment rate is still increasing. As of April 23, 2020, The Department of Labor published unemployment insurance claims numbers totaling roughly 26.5 million claims, representing 16.2% of the labor-force. These numbers are staggering compared to 2008’s 15.3 million. For now, the long run is the most important time frame to give focus and the stock market’s volatility will continue to respond to any and all optimism or digressions in the news. The collapse of oil and weak earnings has pushed the market all over the place. Another 2-4 weeks of pullback/consolidation is to be expected; however, it appears the bottom has been set in the 2200 area on the S&P 500 back in March. This pullback might be the last low entry point to buy for 2020. Time will tell. HCM04820-13

Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


What is a Self-Directed Brokerage Account and Should You Open One?

WHICH TYPE OF RETIREMENT PLAN INVESTOR ARE YOU?
Are you generally satisfied with the core set of investment vehicles offered through your employer’s retirement plan? Does quarterly viewing of statements and occasionally signing into a digital dashboard typically suffice when it comes to monitoring your retirement plan balances? Or, are you a more involved investor? Do you wish you had access to a broader range of asset investment opportunities for your company-sponsored plan so that you can more specifically call the shots with your investment dollars?  
AN ALTERNATIVE APPROACH — FOR SOME
For those who seek more control of the investments within their retirement savings plan, an option exists. Offered by approximately 40% of employers, a self-directed brokerage account (SDBA) allows retirement savers to take a more hands-on approach to managing their money. There are some things to consider before jumping into what, on the surface, may seem to be a good way to grow your retirement savings more aggressively. You need to understand the pros, cons and a few caveats that go along with self-directed brokerage accounts. But first…  
WHAT EXACTLY IS A SELF-DIRECTED BROKERAGE ACCOUNT (SDBA)?
SDBAs enable retirement plan participants to make investments outside of the limited number of options typically available within their 401(k)’s, or 403(b)’s, core offerings. This wider array of investment opportunities available via self-directed brokerage accounts often includes stocks, bonds, mutual funds, exchange-traded funds (ETFs) and other securities. ETFs, in particular, have seen a recent uptick in popularity, due in part to volatile markets.  According to human resources consulting and outsourcing firm, Aon Hewitt, approximately 40% of employers offer SDBAs within their retirement plans. However, not many retirement plan investors choose to take advantage of SDBAs. Aon Hewitt has reported participation rates at only 3-4%. This low rate is likely due to a correctly-assumed need for sufficient investment experience.  
WHAT YOU SHOULD KNOW ABOUT SDBAS
As with any other impactful decision, if you’re thinking about participating in a self-directed brokerage account, you need to be informed. Consider the advantages and disadvantages of SDBAs. Evaluate whether one will fit your specific financial situation, investing “personality” and ability to spend sufficient time directing your investment dollars. To help with those considerations, we’ve boiled down some key points… Potential Benefits
  • Greater control – SDBAs are self-directed, so you’re in the driver’s seat. You make your choices in a more specific and detailed manner, deciding where you’d like your investment dollars to go. Simply put, it’s a more hands-on investing approach.
  • More flexibility & diversity – You can access a much larger variety of investment options. This allows you to fill in the gaps on what you may see as missing asset classes within your standard retirement plan offerings. Examples of these assets might be emerging markets, international small cap or real estate and commodities.
  • You don’t have to go “all-in” – Most retirement plans with SDBA options allow you to allocate only part of your retirement savings to these accounts. This helps mitigate any risks that may be associated with your hand-picked investments. It also means you can benefit from the overall chosen set of plan investments while still rounding out your portfolio with other investment choices.
  Possible Pitfalls
  • More attention (and calm) is required – SDBAs should be carefully monitored. Do you have the bandwidth and discipline to give a self-directed account the kind of attention an SDBA requires? And, equally important — can you avoid being overly reactive to the invariable performance blips, both big and small?
  • Understand the fees – You need to be clear on the various fees associated with both your core retirement plan’s investments as well as those that come with a self-directed account. Being uninformed on items like transaction costs and commissions could have a negative impact on what you assume will be higher returns.
  • Not for the casual investor – The benefits of control and breadth of choice can also be liabilities. You must be knowledgeable and comfortable enough to make sound investment decisions amongst an overwhelming number of options. Not everyone is in a position to take on the increased risk that comes with access to a large set of diverse investments, some of which they might not be very familiar with.
  More to Consider — Increased Risk of Loss Over the years, self-directed brokerage accounts have raised concerns in fiduciary and legal circles because they allow investors to take much greater risks with retirement savings. Because not everyone has the same access to investment information, guidance and experience, SDBAs can put less-informed investors at an increased risk of loss. Investing and finance education website, Investopedia, recently wrote — “Plan sponsors that offer brokerage accounts should carefully analyze the potential liability of substantial losses sustained by novice investors. Many sponsors believe that they cannot be held responsible for what happens in these accounts, but many benefits experts and attorneys say otherwise. All other investment options inside qualified plans are required to meet certain fiduciary characteristics, even if they are aggressive in nature. But a large percentage of the investment options that participants can purchase in a brokerage account will fail to meet this standard.”    Numbers of Note Published quarterly, the Schwab Self-Directed Brokerage Account Indicators report contains data associated with approximately 137,000 SDBAs. The trends and statistics presented in the report may help give you a better feel for whether a self-directed brokerage account is where you want to place a portion of your retirement plan dollars. Below are some interesting numbers on SDBA balances, asset allocations and generational behavior from their most recent report:
  • Mutual funds make up the highest percentage of participant assets at 37%, of which large-cap funds receive the highest allocation.
  • Equities account for 28% of SDBA assets.
  • 15% of participant assets are allocated to cash.
  • Fixed-income assets account for 3% of SDBA assets.
  • Participants average 2.2 trades per month.
 
WHO TAKES ADVANTAGE OF SELF-DIRECTED BROKERAGE ACCOUNTS?
SDBAs don’t necessarily make sense for all employers or individuals. These accounts have typically been for those with big balances and plenty of financial acumen. The level of comfort and knowledge needed to make good use of an SDBA option is most frequently found among high-earners. Financially-savvy legal, medical and consulting professionals are often participants with SDBAs. According to David Wray, President of the Plan Sponsor Council of America (PSCA), “It was a standard plan design, especially for law firms, historically.” He goes on to say, “the people who use [brokerage windows] are typically highly paid – not your typical 401(k) participant going into a target-date fund.” Of course, there are exceptions to this “high-earner” profile, and you may be one of them. Only you can make that determination.  
SHOULD YOU OPEN A SELF-DIRECTED BROKERAGE ACCOUNT?
As with almost any scenario that presents the opportunity for greater reward, greater risk also comes along with the territory on SDBAs. Educating yourself with timely and relevant information is the best way to make a smart choice that works for your investing style and retirement goals. After you determine that your employer offers an SDBA option as part of their retirement plan, seek out whatever information the plan administrator offers. After you’ve confirmed that your retirement plan includes an SDBA option, it’s all about leveraging trusted resources to help you make an informed decision. Trusted resources come in many forms such as your existing investment advisor or broker-dealer, known investment sites like Investopedia and ThinkAdvisor, mainstream news sources — and personal sources like investment-savvy family and friends.  
A REMINDER
Lastly, if indeed you do decide to take advantage of a self-directed brokerage account, remember — having a pre-set investment plan in place is essential. Giving in to the temptation of thinking you can time the market, buying low and selling high, chasing “hot” stocks or funds, and simply, “going with your gut” are all recipes for loss. Do your best to remove emotion from the equation and stick to your plan.   Contact Howard Capital Management, Inc. At Howard Capital Management, Inc. (HCM), we understand how important it is to work with someone you trust, that can create and deliver tools and technology to help you navigate the market with ease.  By planning for your financial future now, you can make your retirement an exciting and smooth transition. 

Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


5 Benefits of Investing in a 401(k)

In 2016, about 55 million Americans had an active 401(k) and as of 2018, these plans held $5.6 trillion in assets[1].  It’s no surprise that many employees are choosing to save for retirement by making contributions to an employer-sponsored 401(k) plan, as there are several advantages to utilizing this savings vehicle.
 
1. Tax-Deferment 
One of the more well-known benefits of a 401(k) plan is the ability to make a contribution on a pre-tax basis.  Typically, funds are automatically moved to your 401(k) through a payroll deduction, decreasing the total amount of your taxable income. When you eventually withdraw these funds, during your retirement years, you will be required to pay taxes on the distribution.  However, you will likely be in a lower tax bracket than you were during your working years, ultimately saving you more of your hard-earned money.
 
2. Matching Contributions
Many employers offer a matching contribution up to a certain dollar amount or percentage of an employee’s salary.  Essentially, as an employee, you are being given the opportunity to invest “free” money, helping you grow your 401(k) more quickly.  If your employer offers this perk, try your best to take full advantage by contributing at least enough to reach the maximum match.  Don’t make the mistake of leaving money on the table!  
3. Payroll Deductions
The ability to have funds automatically moved to your 401(k) through payroll deductions is an incredible benefit to employees.  Because the money never makes it to your paycheck, you are much less likely to spend it and instead, can let it work for you as an investment.  Offering the option for automatic contributions is just one way that employers can help their employees succeed when it comes to saving for retirement.  
4. Asset Protection
Most employer-sponsored 401(k) plans comply with the Employee Retirement Income Security Act (ERISA).  ERISA’s main goal is to set standards for most retirement and health plans and to “provide protection for individuals in these plans.”[2]  This means that should any financial trouble arise, the assets in your 401(k) plan will be protected from creditors. If needed, the Human Resources department or 401(k) Administrator at your company will have more information regarding your specific plan and if it meets ERISA requirements.  
5. Professional Advice
Investing in a 401(k) is a great starting point to begin working with a financial professional.  Your employer may offer access to a professional who can assist you with your 401(k) plan, however it may be beneficial to outsource to a financial advisor.  He or she can not only help you with your 401(k) but can also help you focus on other investment opportunities and create a more complete personalized plan for the future. Howard Capital Management, Inc. (HCM) is proud to offer the 401(k) Optimizer®, an easy, automated online tool to help you manage your retirement investments (401(k), 403(b) or 457). Using your risk tolerance level and long-term goals, the 401(k) Optimizer® generates personal portfolio allocation recommendations and recommends what to buy, when to buy and when to sell based on your plan’s investment options and market fluctuations.   Contact Howard Capital Management, Inc. A properly managed 401(k) can help maximize its growth potential and give you peace of mind about your retirement plan. The earlier you begin, the greater your return can be in the long-run.  In addition, a 401(k) can be a great stepping stone into other types of investments, allowing you to diversify your portfolio and balance your risk. By planning for your financial future now, you can make your retirement an exciting and smooth transition. Learn more about the 401(k) Optimizer® and have your questions answered by contacting Howard Capital Management, Inc. (HCM) to find an advisor in your area. [1] https://www.ici.org/policy/retirement/plan/401k/faqs_401k [2] https://www.dol.gov/general/topic/health-plans/erisa

Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


4 Simple Steps to Rollover a 401(k) to a New Employer

When you make the decision to change jobs, you will also need to decide what to do with the funds in your 401(k) plan. Do you leave it in the current plan? Move it to your new company? Roll it over to an IRA?  Take some time to conduct research, evaluate your options and discuss a plan with your financial advisor.
 
STEP ONE: RESEARCH OPTIONS
There are pros and cons to all of the choices you can make regarding a rollover of your 401(k), and your ultimate decision should be based on your personal situation—how much you currently have invested, the new company’s plan structure and your investment goals.  Your financial advisor can help you compare your current plan with your new company’s plan to determine whether leaving your funds at your old company or taking them with you would be more advantageous. Additionally, your new company may also have a dedicated representative who can provide guidance. You also have the option of rolling over your funds to a traditional or Roth IRA.  Depending on how your current 401(k) is structured—if you’ve made Roth contributions, for example—there may be some rules regarding the specific funds that can be transferred.  Lastly, you have the option to withdraw all funds.  Due to tax implications which could cause a significant decrease in your savings, this method is generally not suggested. As always, we highly recommend discussing this with your financial advisor to determine the plan that best suits your needs.  
STEP TWO: ESTABLISH A PLAN
Once you have made the decision about where you will be moving the funds in your current 401(k) plan, you’ll want to look into whether to do a direct or indirect rollover. With a direct rollover, your funds will be transferred directly from one trustee to another.  This means that your old company will send the funds to your new company or IRA, and no money will be withheld for taxes.  Because this tends to be the most seamless process and has no tax penalty, most financial advisors would recommend doing a direct transfer. If you prefer to have a distribution check made out and sent to you personally, after which you will manage the rollover of funds to your new company’s plan or an IRA, this is considered an indirect rollover. It’s important to note that because you will technically have use of the funds before they are deposited in the new account, your 401(k) plan is required to withhold 20% of your funds for federal income taxes; however, you are still responsible for redepositing the full amount that was in your 401(k), and the 20% that was withheld will then be returned to you as a tax credit.  In addition, you must conduct your rollover within 60 days, or it will be seen as an early withdrawal and is subject to additional taxes. For example, if your 401(k) is worth $5,000 and you received a check for $4,000 (funds minus 20% withholding), you must still redeposit the full $5,000 within 60 days and that $1,000 that was withheld will count as a tax credit.  
STEP THREE: TRANSFER FUNDS
Now that the hard work is done, you can request a distribution form from your current employer.  Once the paperwork is completed, they can start the transfer of funds whether through a direct or indirect rollover to your account of choice. If you’ve chosen to rollover to a traditional or Roth IRA, but don’t currently have one set up, you may need to work with your financial advisor to open that account before your funds can be transferred.  
STEP FOUR: INVEST YOUR ASSETS
Putting your funds to work as soon as possible allows your funds to begin earning and compounding more quickly.  There are seven rules that pro-active employees follow with their 401(k) investments to help maximize their returns including taking advantage of a company match and diversification. Entrusting Howard Capital Management, Inc. as Your Money Manager Hiring a well-versed money manager/financial advisor can be one of the most beneficial choices that you, as an investor, can make. At Howard Capital Management, Inc. (HCM), we understand how important it is to work with someone you trust, that will create and deliver on a personalized plan that has your best interest in mind.  HCM’s knowledge, experience and proprietary technology will provide you with a financial support system that you can rely on.   Contact Howard Capital Management, Inc. By planning for your financial future now, you can make your retirement an exciting and smooth transition. Receive guidance and have your questions answered by contacting Howard Capital Management, Inc. (HCM) to find an advisor in your area.

Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


What is a Roth IRA and Do I Need One?

Whether you are rolling over an existing 401(k) or looking to expand your investment portfolio with a new retirement account, a Roth IRA is an option worth exploring.  A Roth IRA offers many significant benefits; however, certain eligibility requirements must be met before an investor is able to contribute.

WHAT IS A ROTH IRA?

A Roth IRA is a retirement savings account funded with after-tax dollars. Similar to a 401(k), assets (stocks, bonds, ETF’s, etc.) are allocated within your investment portfolio based on your risk tolerance levels and investment goals.

Because you have already paid taxes on the dollars going into your Roth, your money is able to grow tax-free; and when you make a withdrawal in your retirement years, you pay no taxes, even on the investment earnings.

Tax laws dictate annual contribution limits.  In 2019, an individual can make a contribution of up to $6,000 per year, or $7,000 per year if age 50 or older.  Also, you have 15 months, from January 1, 2019 until the tax deadline of the following year (April 25, 2020), to make a 2019 contribution.

HOW IS IT DIFFERENT THAN A TRADITIONAL IRA?

A financial advisor can help you determine if you should pursue a Traditional or Roth IRA account.  Ultimately, the decision will depend on your current tax bracket, your expected tax bracket at retirement as well as your personal goals.  The following chart breaks down some of the biggest differences between a Traditional and Roth IRA.

WHAT ARE THE BENEFITS?

A Roth IRA offers many unique benefits to investors.  For instance, you can open a Roth IRA account and begin investing at any age, provided that you meet eligibility requirements.

Perhaps the most significant benefit is that your investments can grow tax-free as contributions are made with after-tax dollars.  Assuming you have had the account for at least five years, there are no taxes or penalties on any money, including investment earnings, withdrawn after age 59 ½.  In addition, you have complete access to your direct contributions, and can withdraw them at any time, also without taxes or fees. 

Another substantial benefit is that you are not required to make a distribution once you reach a specific age—there is no required minimum distribution (RMD) as there is with other retirement accounts.  Also, there is no contribution age limit—as long as you are earning an income that is eligible, you can contribute.

AM I ELIGIBLE?

In general, if you are bringing in an income (salary, hourly wages, etc.), you are able to contribute to a Roth IRA.   However, the amount that you can contribute is determined by your tax filing status and income range.  A non-working spouse may also be eligible to open a separate Roth IRA based on the income of the working spouse, but the couple must be married and file taxes jointly.

*If you are age 50+, you can contribute an extra $1,000 per year for a total of $7,000.

**As you begin to earn a higher income, the amount that you can contribute will be reduced.  Your financial advisor will use a formula to determine this specific dollar amount.

***While you may be ineligible to contribute directly to a Roth IRA, you may be able to contribute using the “backdoor method.”

Backdoor Method

Once your income reaches a specific limit, you are no longer eligible to contribute directly to your Roth IRA account.  However, higher earners can use a backdoor strategy to bypass these restrictions and continue to fund their Roth IRA.

Investors may find it beneficial to begin with a traditional IRA since anyone, earning any amount, can make a contribution of any size.  Once established, it can then be converted to a Roth account; though the funds, and any investment earnings, will be taxed before it is rolled over.

A financial advisor can guide you through the process of contributing to a Roth through the “back door” and can help you stay mindful of any tax implications.

HOW DO I OPEN A ROTH IRA ACCOUNT?

Once you have decided that a Roth IRA is the right retirement account for you, contact your financial advisor for help in establishing the account.

Your account can be opened directly with Howard Capital Management, Inc. (HCM) or with another institution like a bank, credit union or broker such as E*Trade.  HCM can also serve as your money manager, however if your account is located elsewhere, it would first need to be transferred to HCM.

WHEN CAN I WITHDRAW FUNDS?

Similar to making contributions, there are also rules regarding withdrawals from a Roth IRA account.  You can withdraw your direct contributions at any time, without taxes or penalties.  However, for funds that were converted into your Roth (i.e. through the backdoor method), you must wait at least five years before you can make a penalty-free withdrawal.

To withdraw any investment earnings, your account must have been established at least five years prior AND you must be at least age 59 ½.  If these two requirements are not met, the funds you withdraw may be subject to taxes or fees. The only exception is a qualified distribution in which the investor can be younger than 59 ½ but still must wait at least five years after the account was created.  Additionally, the withdrawn funds must either be used towards the purchase of a first home or needed because the account holder has become disabled or has passed away and the money is being transferred to a beneficiary.

Also, Roth IRA’s do not have a required minimum distribution (RMD) so unless they are needed, leave the funds in your account and let them continue to grow!

Contact Howard Capital Management, Inc.

At Howard Capital Management, Inc. (HCM), we understand how important it is to work with someone you trust, that will create and deliver on a personalized plan which has your best interest in mind. By planning for your financial future now, you can make your retirement an exciting and smooth transition.


Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


Fiduciary Responsibility and Why It Should Matter to You as an Investor

Saving for retirement can be one of the most significant investments that you will make in your lifetime.  You are putting your hard-earned dollars into a variety of savings vehicles, like 401(k) plans or Roth IRA’s, with the hope that your funds will continue to grow.  Many investors choose to hire a financial advisor to assist them with this process—anything from financial education and setting up an account to analyzing results and rebalancing portfolios.  However, a common misconception is that all advisors are alike; so, before you decide to move forward with an advisor, you will want to ensure that he or she is a fiduciary.
 
WHAT IS FIDUCIARY RESPONSIBILITY?
A fiduciary is a person who will only act in the best interest of their client (fiduciary beneficiary).  He or she is held to a higher standard and will provide high quality care. In addition, a fiduciary will disclose any conflicts of interest and will be transparent in all communication.  This fiduciary responsibility applies to the entirety of your relationship—whether it is one day or fifty years. As the beneficiary, you are trusting your advisor to act on your behalf, so it is crucial that you have a relationship built on this foundation.  You can have confidence that any recommendations made or advice given will be based only on your particular situation. 
 
WHY DOES IT MATTER?
While all financial advisors may be knowledgeable about retirement accounts, differentiating between a fiduciary and non-fiduciary advisor could be the difference in how your portfolio performs.  Non-fiduciary advisors are not necessarily required to make recommendations based on your best interest.  Instead, their advice is only required to be suitable for your financial situation, meaning that it may not necessarily be the best option for you (i.e. could be more expensive).  Though many employees trust that their company plan providers are offering good advice, surveys report that many are still concerned about their portfolios. According to Market Watch, one survey of 1,425 adults aged 25 and over with money in a 401(k) or 403(b) plan completed by AARP stated: “Seventy-eight percent of savers said they are “very concerned” or “somewhat concerned” that the advice they get through their workplace plan isn’t always required to be in their best interest.”[1] Because of conflicted investment advice, those saving for retirement lose an estimated $17 billion each year.[2] To avoid these losses, it is crucial that Americans continue to educate themselves about fiduciary duty so they are prepared to make more diligent decisions regarding their finances.  
WHAT SHOULD I LOOK FOR IN A FINANCIAL ADVISOR?
The first step in finding the right financial advisor is to determine what you need from the relationship.  If, for example, you are comfortable making your own investment decisions and only need help placing trades, it may not matter whether the advisor you choose is a fiduciary. However, if you are looking for someone to guide you through the retirement savings/investment process and make recommendations, finding a fiduciary will be more important. When you are interviewing potential advisors, ask if they follow the fiduciary standard.  If they do, they should be able to answer with a simple, “Yes.”  In addition, if an advisor offers his or her services to you for free, this could be a red flag that there may be hidden fees. Ultimately, the advisor you choose should be someone who you feel is the best match for your needs.  In addition to references provided by family and friends, Howard Capital Management, Inc. (HCM) can put you in touch with a trusted advisor in your area.  
INVEST WITH CONFIDENCE
Thanks to technological advancements, HCM has taken fiduciary responsibility to the next level by helping investors to become more informed and make investment decisions with more confidence. Online investment tools, such as HCM’s 401(k) Optimizer®, can offer personalized investment advice based on a computerized analysis of an individual’s retirement plan.  Using your risk tolerance and long-term goals, the system can recommend:
  • Which specific funds to choose in the employer’s plan.
  • How much to invest in each fund.
  • When to rebalance the account.
  • What to do with your investments when the markets rise or fall.
Together with your financial advisor, these tools can help you customize your portfolio as you work to optimize your investments and achieve a more secure financial future.  These recommendations will always be made with your best interest in mind.   Contact Howard Capital Management, Inc. At Howard Capital Management, Inc. (HCM), we understand how important it is to work with someone you trust, that can create and deliver tools and technology to help you navigate the market with ease.  By planning for your financial future now, you can make your retirement an exciting and smooth transition. [1] https://www.marketwatch.com/story/401k-investment-advice-can-you-trust-it-2013-09-10?page=2 [2]https://obamawhitehouse.archives.gov/sites/default/files/docs/cea_coi_report_final.pdf

Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


What is a 529 Plan?

529 Plans are one of the most popular savings vehicles for higher education, giving individuals a way to save on behalf of a beneficiary.  Also known as qualified tuition plans, 529 plans are “sponsored by states, state agencies or educational institutions and are authorized by Section 529 of the Internal Revenue Code [1].” 
 
WHAT ARE THE TYPES OF 529 PLANS?
Prepaid Tuition Plans: Prepaid tuition plans allow individuals to prepay tuition at its current rate.  Because this type of plan locks in the rate, it can help to ease concerns about inflation and the rising costs of a college and university level education.  However, many prepaid plans have specific residency requirements and/or guidelines for where a student may choose to attend college/university (typically in-state, public institutions).  At the time of publication, 16 states have an option for a prepaid tuition plan:
  • Alabama Massachusetts Tennessee
  • Colorado Michigan Texas
  • Florida Mississippi Virginia
  • Illinois Nevada Washington
  • Kentucky New Mexico West Virginia
  • Maryland South Carolina Wisconsin
  Education Savings Plans An education savings plan is a savings account made up of mutual funds, ETF’s, etc. from which funds can be used specifically for higher education purposes.  This may include, but is not limited to, tuition, fees, room and board, technology/equipment, and books.  Investors can typically be more aggressive with their investment strategies when children are younger.  However, as the child gets closer to college-age, it is usually recommended to switch to a more conservative approach. In 2018, a new tax law was implemented so that $10,000 per student per year can be used toward private elementary or secondary school (for tuition only). You can choose any state’s plan, regardless of your state of residency; however, each has its own set of fees and benefits.  For example, if you are a Georgia resident and you choose to invest in Georgia’s Path2College 529 Plan, you can claim a state tax deduction for your contributions.  
WHAT ARE THE BENEFITS?
In addition to state-specific advantages, there are general benefits that all 529 plans provide:
  • Anyone can make a contribution
  • The plan can be transferred to any family member or beneficiary
  • No income limits—anyone can open and contribute regardless of their income
  • It is a low maintenance investment option
  • The plan owner, not a beneficiary, maintains control of the plan
  Tax Benefits Tax benefits vary from state to state, and it is always best to consult your accountant regarding your specific circumstances. But in general, the following benefits will almost always apply:
  • Withdrawals are not subject to federal taxes if taken for qualified expenses
  • Earnings grow tax-free
  • Contributions are typically exempt from gift taxes
  • Contributions may be fully or partially deducted from state income tax (currently in more than 30 states)
  • You may only be eligible if you invest in the 529 Plan from your state of residency
 
HOW DO I OPEN A 529 PLAN?
Before opening a 529 plan, you will want to research all available options.  If your state offers benefits for its residents, that may be the best option.  If not, you may find that another state’s plan will be a better fit. Once you have made a decision, visit the plan’s website to open the account and choose your investment options.  A money manager, like Howard Capital Management, Inc. (HCM), can then help you make the most of your investment.  
WHEN SHOULD I OPEN A 529 PLAN?
Many parents choose to open a 529 Plan as soon as their child is born, allowing the investment to grow for 18 years before using it for higher education. Your financial advisor may also suggest investing in a 529 Plan in conjunction with a Roth IRA to maximize your savings.   Contact Howard Capital Management, Inc. At Howard Capital Management, Inc. (HCM), we understand how important it is to work with someone you trust, that will create and deliver on a personalized plan which has your best interest in mind. By planning for your financial future now, you can make saving for higher education an exciting and smooth process.

Disclaimer

This communication is issued by Howard Capital Management, Inc. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and may transact in them as principal or agent. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. Our proprietary indicator, the HCM-BuyLine®, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine® indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine® indicates a bear market, HCM moves clients’ investments to less risky alternatives. Not every HCM-BuyLine® buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients’ exposure to equities during market downturns by following an HCM-BuyLine® signal, thereby preserving capital. Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Howard Capital Management), made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy will be equal to past performance level or that it will match or outperform any particular benchmark.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Howard.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from the use of this communication. A copy of Howard’s current written disclosure statement discussing our advisory services and fees are available on our website http://www.howardcm.com. LASS.102820 HCM.102820.50


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