Wealth management and financial planning; for individuals and businesses.

Why Long-Term Investing Works: A Time-Tested Strategy for Stock Market Success

January 17, 2024

Spend Time Growing Your Assets

In today's world, the secret to increasing your wealth isn't about following the newest trends but sticking to a tried-and-true method: investing for the long run. Despite the stock market's ups and downs, it's important to remember that growing your money takes time. It's more about how long you stay invested, not about picking the perfect moment to invest.




The Case for Long-Term Investing

1. High Return Potential of Emerging Market Indices: 
Emerging market indices, known for their high return potential, offer compelling evidence for the long-term investing approach. Take, for instance, the Nasdaq 100 Index, which includes 100 of the largest and most innovative non-financial companies listed on the Nasdaq Stock Market. Between December 31, 2007, and June 28, 2019, this index boasted an average annualized return of about 13%. While it's true that such indices may exhibit higher risk and volatility, their growth potential over time is undeniable.


2. The Stability of the S&P 500: 
The S&P 500, representing 500 leading U.S. companies and covering approximately 80% of the market capitalization, is often seen as the best single gauge of large-cap U.S. equities. During the same period, it averaged a 9% annualized return, albeit with less volatility than the Nasdaq 100. This stability and consistent growth underscore the benefits of long-term investing in well-established indices.


3. Avoiding Emotional Trading: 
One of the most significant advantages of long-term investing is the ability to sidestep emotional trading, which often undermines investor returns. Historical setbacks, including the Great Depression, Black Monday, the tech bubble, and the financial crisis, have all demonstrated that investors who stayed the course with their investments in major indices like the S&P 500 or Nasdaq 100 ultimately realized gains. This resilience through market highs and lows highlights the strength of a long-term investment strategy.



Making the Most of Your Investing Years

Long-term investing is not merely a strategy but a philosophy that emphasizes patience, perseverance, and a forward-looking perspective. It's about recognizing that while markets may fluctuate, the trajectory of well-chosen investments is upward over time. For business owners and individual investors alike, adopting a long-term outlook can significantly impact the growth of your investment portfolio.

If you're contemplating your investment strategy or seeking to optimize your portfolio for the long haul, reaching out for professional guidance can be invaluable. Whether it's understanding the nuances of different market indices or crafting a diversified investment plan that aligns with your goals, a conversation with a financial advisor can provide clarity and direction.



Final Thoughts
Investing for the long term is a proven path to financial success in the stock market. It allows investors to benefit from the growth potential of indices like the Nasdaq 100 and the S&P 500 while minimizing the impact of volatility and emotional decision-making. As you navigate your investing journey, remember that the most significant returns come from patience and persistence, not from attempting to outguess the market.


* The information contained in this material is for general information only and are those of the author, and not a recommendation or solicitation to buy or sell investment products. This material was developed and produced by Levitate which is not affiliated with the named broker-dealer. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.

 Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

 S&P 500 - A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Prepare for Potential Tax Changes: Why You Should Act Now

October 1, 2024
The upcoming expiration of key provisions from the Tax Cuts and Jobs Act (TCJA) in 2026 could significantly impact your financial situation. With current tax rates still lower, there are key opportunities to consider today before these changes take effect. For those who prefer quick takeaways, here are some immediate recommendations: Key Recommendations: Consider Roth Conversions Now: Lower tax rates today, due to the TCJA, make Roth conversions attractive. However, your personal circumstances, such as age and whether you plan to move to a lower-tax state, should influence your decision. Plan for Changes to Mortgage Interest Deduction: The current $750,000 limit on mortgage interest deduction will revert to $1 million in 2026 when the TCJA provisions sunset, and home equity loan interest up to $100,000 will become deductible again. Take Advantage of SALT Deduction Expiration: The $10,000 cap on state and local tax (SALT) deductions will expire in 2026, potentially allowing individuals in high-tax states to deduct more of their taxes. Prepare for Miscellaneous Deductions: Deductions for unreimbursed employee expenses and tax prep fees, which the TCJA eliminated, will return in 2026 if they exceed 2% of your adjusted gross income. Review Estate Tax Planning: The estate tax exemption will revert to pre-TCJA levels in 2026. The exemption amount is expected to decrease from its current level of $12.92 million for individuals and $25.84 million for couples to approximately $5 million for individuals and $10 million for couples, adjusted for inflation. As we approach 2026, the expiration of certain provisions from the Tax Cuts and Jobs Act (TCJA) could bring significant tax changes. By acting early, you can take advantage of today’s lower tax rates while preparing for what’s ahead. One key area to consider is Roth conversions. Under the TCJA, tax rates are currently lower, making it an ideal time to convert traditional IRA funds into a Roth IRA. This strategy could be beneficial if you anticipate a higher tax bracket in the future. However, your personal circumstances matter. If you currently live in a high-tax state but plan to move to a lower-tax state in retirement, delaying the conversion might be a better option. Age also plays a role in deciding the best time to convert. Mortgage Interest Deduction Another major change tied to the TCJA is the mortgage interest deduction. At present, taxpayers who itemize deductions can deduct interest paid on the first $750,000 of mortgage debt, a limit set by the TCJA for debt incurred after December 15, 2017. However, when these provisions expire in 2026, the limit will revert to $1 million. Additionally, interest on home equity loans of up to $100,000—regardless of the loan’s purpose—will once again be deductible. If you have a large mortgage or home equity loan, these changes could increase your deductions, offering valuable tax savings. It’s important to review your mortgage situation and plan for these upcoming adjustments. SALT and Miscellaneous Deductions The state and local tax (SALT) deduction cap, which was a hallmark of the TCJA, is another significant change set to sunset in 2026. Currently, the deduction is capped at $10,000, limiting the benefits for individuals in high-tax states. Once the cap expires, you’ll be able to fully deduct state and local taxes if you itemize your deductions. Additionally, miscellaneous deductions, including unreimbursed employee expenses and tax preparation fees, were eliminated by the TCJA. These deductions will return in 2026, allowing those whose expenses exceed 2% of their adjusted gross income to claim these deductions once more. Estate Tax Changes Another significant change on the horizon is the estate tax exemption. Under the TCJA, the estate tax exemption was doubled, allowing individuals to pass on up to $12.92 million and couples up to $25.84 million without incurring federal estate taxes. However, when the TCJA sunsets in 2026, this exemption will revert to pre-TCJA levels, approximately $5 million for individuals and $10 million for couples, adjusted for inflation. This reduction in the exemption amount could affect your estate planning, especially for those with significant assets. Take Action Now With the expiration of the TCJA provisions on the horizon, now is the time to start planning. Whether you’re considering a Roth conversion or want to understand how these changes to deductions could impact you, it’s essential to consult with your financial advisor. Once November’s election is over and we have added clarity about potential tax policies, we will be prepared to execute a proper plan for you. If you’re already a client, reach out to your advisor today to discuss your options. If you’re not yet a client of Meritrust, don’t wait—call to speak with one of our advisors or schedule a meeting today. Together, we can review your current financial plan and ensure you’re maximizing the opportunities available before the TCJA sunsets in 2026. These potential tax changes could have a lasting impact on your financial future, and being prepared to take action quickly could help you secure greater financial stability for the years ahead.

Playback: Understanding Social Security and Medicare - Your Journey to the Essentials

By Megan Williams • September 19, 2024
Watch as your Meritrust Team discusses the basics of Social Security and Medicare while covering some of the ways in which financial planning can help you make the right choice for you and your goals.

Supreme Court Ruling on Buy-Sell Agreements – What Business Owners Need to Know

By Megan Williams • August 23, 2024
Key Points: Impact on Business Valuation: Life insurance proceeds must be included in the business valuation for estate taxes. Potential for Higher Estate Taxes: This could push estates over the exemption limit, increasing tax liabilities. Liquidity Concerns: Without proper planning, businesses may face liquidity challenges when covering estate taxes. Alternatives Available: Different buy-sell structures can help avoid these issues. As a business owner, planning for the future involves many complex decisions, especially when it comes to protecting the value of your business and ensuring a smooth transition in the event of an owner’s death. The recent Supreme Court decision in Connelly v. United States has introduced significant changes that could affect your estate planning, particularly if your business relies on an entity-purchased buy-sell agreement. Understanding the Supreme Court's Decision The ruling centers on how life insurance proceeds are treated within entity-purchased buy-sell agreements for estate tax purposes. The Supreme Court has ruled that these proceeds must be included in the business’s valuation within the deceased owner’s estate. However, the repurchase obligation—essentially the cost the business incurs to buy back the shares—cannot be used as an offset against the fair market value (FMV) of the business. This change could result in a higher valuation of your business, potentially increasing the estate's value and leading to larger estate tax liabilities. What Does This Mean for You? As a business owner, you might now face a situation where your estate's value is inflated due to the inclusion of life insurance proceeds, pushing you over the current estate tax exemption limit. This could result in a significant increase in the taxes owed upon your passing, creating challenges for your heirs and possibly requiring them to sell business assets to cover these taxes. Liquidity Issues: This ruling could also introduce liquidity challenges. Without additional life insurance or proper planning, your estate might struggle to cover the increased tax liability, putting the future of your business at risk. How to Protect Your Business Thankfully, there are strategies available to mitigate these potential issues: Cross-Purchase Buy-Sell Agreements: In this structure, each business owner holds a life insurance policy on the other owners, allowing the proceeds to bypass the business entirely. This structure can help avoid inflating the business’s valuation. Cross-Endorsement Structures: This approach reduces complexity by allowing each business owner to endorse their life insurance policy’s death benefit to the other owners, simplifying administration while avoiding the estate tax impact. Insurance LLC: Forming an LLC to own the life insurance policies can centralize and streamline policy management, although this requires careful structuring to ensure it avoids the same tax implications as entity-purchase agreements. Trusteed Buy-Sell Agreements: By placing the life insurance policies under the control of a trustee, the proceeds can be used to facilitate the buyout without increasing the business's estate valuation. Next Steps If your business has a buy-sell agreement in place, now is the time to review it with your financial advisor and legal counsel. Ensuring that your planning is up-to-date and compliant with the latest legal developments is crucial to protecting your business’s future. We’re here to help you navigate these changes and find the best solutions for your unique situation.
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