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Demystifying Investment Jargon: What Is Correlation?

Written by Brian Puckett, CFP®, CPA/PFS, Attorney at Law.

Here at Align Wealth Management, we try to keep financial jargon to a minimum. But some references are worth translating, because there is valuable information behind the mumbo-jumbo.

Consider us your interpreter. Today, we’ll explore correlation, and why it is a key element of evidence-based investing.

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A Focus on Fixed-Income

Written by Brian Puckett, CFP®, CPA/PFS, Attorney at Law.

It’s been approximately a decade since the Great Recession began. By the end of 2008, the U.S. Federal Reserve had lowered the fed funds rate to near zero and embarked on a campaign of “quantitative easing,” delivering a booster shot of lending, borrowing, and spending to revive the economy. Now the Fed is reversing course, restoring monetary policy and targeting historical norms by gradually raising interest rates and tightening policy.

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A Financial Survival Guide for Surviving Spouses

The death of a great First Lady transcends politics. Our nation just laid Barbara Bush to rest, and Americans have been deeply moved by her devotion to family and nation – and to her spouse, former President George H.W. Bush, now a widower after 73 years of marriage. Most of us would feel incredibly blessed to have such an enduring marriage. And it’s almost impossible to imagine what it must be like to move forward alone.

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Eight Tips for Navigating Market Downturns

The first quarter of 2018 has delivered a clear reminder that the law of gravity remains in force and markets can go up as well as down. Intellectually, experienced investors know a certain amount of volatility comes with the territory and is nothing to panic about. But humans are emotional creatures, and it can be hard for us to ignore the twinges of worry that we often feel when markets reverse course.

Downturns can test investor resolve, sabotage otherwise solid plans, and just plain hurt. But experience and evidence are on the side of investors with a long-term outlook. Acting rashly is far more damaging to portfolios than maintaining rational resolve during market downturns.

Just as we prepare for any emergency by practicing how to avoid blunders, we can take steps to avoid costly mistakes when markets are in the negative.

1. Don't panic. It's easy to believe you're immune from panic when the financial sun is shining, but it's hard to avoid indulging in worry during a crisis. If you're entertaining seemingly logical excuses to bail out during a steep or sustained market downturn, it's highly likely your behavioral biases are doing the talking. Even if you only pretend to be calm, that's fine, as long as it prevents you from acting on your fears.

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Is it Time to Rebalance Your Portfolio?

Every investor wants to buy low and sell high. What if we told you there is a disciplined process for doing just that, and staying on track toward your personal goals while you're at it? There is, and it's called rebalancing.

Here's how it works. Imagine it's your first day as an investor. As you create your new portfolio, you've got a plan to put a portion of your assets in stock, a portion in bonds, and so on. Assigning these weights is called asset allocation.

Then time passes. Because markets don't move in tandem, your investments stray from the original allocations. Even if you've done nothing, market shifts mean you're now taking on higher or lower risks and expected rewards than you intended. Unless your plans have changed, your portfolio needs some attention. This is what rebalancing is for: to shift your assets back to their intended, long-term allocations.