Happy Summer Break to you and your family!
We sincerely hope you are enjoying your summer and taking time to make memories that will last a lifetime.
Another edition of The Inside Scoop is here and this one is packed full of more great content. In this quarter’s edition you will find timely pieces surrounding Overall Market Trends, Estate Planning and Morgan Housel's most recent blog post, Quiet Compounding.
We also included a few photos of recent events our team has experienced. We hope you enjoy.
Yaz, Justin, Karley, Ashley & Whitney
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In June, we hosted our second Annual SHRED-IT with BAIRD & GIVE BACK event. It's always fun to serve our clients in new ways, but this year we added another layer making it that much more gratifying. You all SHOWED UP for our community by donating canned fruit, veggies, and meat for the Salvation Army in Murfreesboro.
At Baird, we are always looking for ways to serve our community better. This local non-profit is near to us as our entire branch was able to serve alongside Jason in the kitchen this past May. We are grateful for Jason and his team who serve 30-50 people 7 nights a week every week with compassion & joy.
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QUIET COMPOUNDING
An excerpt from a blog post by Morgan Housel, partner at The Collaborative Fund and New York Times Bestselling author of The Psychology of Money and Same As Ever.
Nature is not in a hurry, yet everything is accomplished,” said Chinese philosopher Lao Tzu.
Giant sequoias, advanced organisms, towering mountains – it builds the most jaw-dropping features of the universe. And it does so silently, where growth is almost never visible right now but staggering over long periods of time.
It’s quiet compounding, and it’s a wonder to see.
I like the idea of quietly compounding your money. Just like in nature, it’s where you’ll find the most impressive results.
Every few years you hear a story of a country bumpkin with no education and a low-wage job who managed to save and compound tens of millions of dollars. The story is always the same: They just quietly saved and invested for decades. They never bragged, never flaunted, never compared themselves to others or worried that they trailed their benchmark last quarter.
They just quiety compounded.
Their entire financial universe was contained to the walls of their home, which allowed them to play their own game and be guided by nothing other than their own goals. That was their superpower. It was actually their only financial skill, but it’s the most powerful one of all.
Imagine if, after your first date with a partner, you had to make every phone call, every text, every conversation with that person public on social media. Or even just with a small group of friends and family. You know what would happen: People would tell you you’re doing this wrong, you’re doing that too much, you should say more of this and less of that, on and on. You’d be so embarrassed, nervous, and influenced by other people’s goals and different personalities that you wouldn’t be you. None of the relationships would work.
Money is similar. People become so nervous about what other people think of their lifestyle and investing decisions that they end up doing two things: Performing for others, and copying a strategy that might work for someone else but isn’t right for you.
I try to keep in mind that there are two ways to use money. One is as a tool to live a better life. The other is as a yardstick of success to measure yourself against other people. The first is quiet and personal, the second is loud and performative. It’s so obvious which leads to a happier life.
Quiet compounding means four things to me:
1. An emphasis on internal vs. external benchmarks.
Always asking, “Would I be happy with this result if no one other than me and my family could see it, and I didn’t compare the result to the appearance of other people’s success?”
It’s impossible to win the social-comparison game because there’s always someone getting richer faster than you. Once you stop playing the game your attention instantly shifts internally, to what makes you and your family happy and fulfilled. It makes it so much easier to enjoy your money, regardless of how you choose to spend and invest it.
2. An acceptance of how different people are, and a realization that what works for me might not work for you and vice versa.
Christopher Morley said, “There is only one success – to be able to spend your life in your own way.”
A lot of financial mistakes come from trying to copy people who are different from you.
So be careful who you seek advice from, be careful who you admire, and even be careful who you socialize with. When you do things quietly you’re less susceptible to people with different goals and personalities than you telling you you’re doing it wrong.
3. A focus on independence over social dunking.
Once you do things quietly you become selfish in the best way – using money to improve your life more than you try to influence other people’s perception of your life. I’d rather wake up and be able to do anything I want, with whom I want, for as long as I want, than I would try to impress you with a nice car.
4. A focus on long-term endurance over short-term comparison.
A lot of people want to be long-term investors but struggle to actually do it. One reason is they get caught up in comparison – comparison to peers, benchmarks, and wondering what other people will think of you if they find out you lost money in the last six months.
Long-term investing is about being able to absorb manageable damage; if you can’t do that, you’re pushed into the much harder trick of attempting to avoid short-term volatility. You’re only durable when you care more about surviving volatility than you do looking dumb for getting hit by it in the first place.
Instead of trying to look smarter than everyone else, you make a quiet bet that things will slowly get better over time.
You’re not in a hurry, yet everything is accomplished.
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Our team exists to come alongside you in your wealth journey as we do not believe in a one sized fits all approach when it comes to your future. In order for us to serve you to the best of our ability, we ask that you keep a few things updated along the way.
Taxes
After filing, send us your tax return. Every year. It's that easy. Our team will then do a thorough analysis.
We will discuss implications and scenario-based decisions personalized to you and your family.
Insurance
Start the conversation and keep us updated on your current plan.
Whether it be a whole life policy review, health or property insurance referrals, we will review your current situation and connect you with the best resource to mitigate risk.
360 Wealth
Log in to the Baird Online app. At a minimum, link the basics (mortgage, 401(k), loans and bank accounts).
Your accounts will auto-update and will feed into your financial plan for a 360 view & precise financial advice. It is important to keep us informed of any outside accounts as we periodically review your long-term goals.
Estate Documents
It is imperative that you update us when there are material changes to your will, power of attorney, and other directives. No one wants to think about the worst case scenario, however, keeping our team informed of any updates ensures a smooth transition if/when it were to happen.
Perspectives on Estate Planning VIDEO
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THERE'S A TEAM BEHIND OUR TEAM
Our relationship with you is special thing – a trusted relationship with experienced professionals who are dedicated solely to your best interests and goals. But we aren’t doing it alone. We have a whole team of experts – many of whom you might never meet – who are just as committed to seeing you succeed.
Wealth, Tax and Estate Planners
Experts who can collaborate on solutions and multigenerational planning that support you and your family
Market Analysts
Portfolio analysts, equity and fixed income analysts and investment strategists, as well as award-winning macroeconomic analysis from Strategas’ policy experts
Technology Experts
Specialists who make sure you can communicate seamlessly and securely with your advisor while investing in cutting-edge tools to provide actionable and tailored insights
Portfolio Managers
Analysts who employ unique strategies to investment research to give you a wide range of portfolios to support your investing preferences
Investment Specialists
Experts who support a robust platform that includes a broad range of investments – including advisory solutions, trusted asset managers, alternative investments and more – to address your unique goals
Cash and Lending Specialists
Lending and liquidity solution consultants to help you maximize your flexibility while ensuring your cash is working as hard for you as possible
Our Wealth Management Partners
Baird experts in businesses outside of wealth management who can partner with you for specialized guidance on business valuations, trust solutions, private equity opportunities and much more
Please don't hesitate to reach out if you ever have questions or want to learn more about our extended team, and how we support your goals.
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The Internal Revenue Service income tax brackets, standard deduction, and retirement contribution limits for the 2024 tax year are below.
Tax Bracket Inflation Adjustment
Overall, tax brackets have been adjusted upwards by 5.4% for 2024. The primary purpose of this adjustment is to account for inflation, which is based on the Consumer Price Index. The government’s goal is to keep income taxes in sync with consumer buying power.
Standard Deduction
The standard deduction has increased to $29,200 for married couples filing jointly, up $1,500 from the previous year. For single filers, this number increased by $750 to $14,600.
Individual Retirement Accounts (IRAs)
IRA contribution limits are up $500 in 2024 to $7,000. Catch-up contributions for those over age 50 remained at $1,000, bringing the total limit to $8,000.
Roth IRAs
The income phase-out range for Roth IRA contributions increased by $8,000 to $146,000-$161,000 for single filers and heads of household. For married couples filing jointly, phase-out will be $230,000 to $240,000 (a $12,000 increase). Married individuals filing separately see their phase-out range remain at $0-10,000.
Workplace Retirement Accounts
Those with 401(k), 403(b), 457 plans, and similar accounts will see a $500 increase for 2024, bringing the total maximum contribution amounts to $23,000. The catch-up contribution for those aged 50 and older remains at $7,500, bringing their total limit to $30,500.
Gift Tax
The annual gift tax exclusion is now $18,000 for 2024, an increase of $1,000 from the previous year.
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STAYING THE COURSE from BAIRD WEALTH
Focus too much on day-to-day market performance and you could miss the larger trend.
You can learn a lot about the stock market simply by observing its history. In fact, given that the future is unknowable, looking back to historical patterns is often one of the best resources we investors have.
One of the clearest and most persistent of these historical trends is simply this: Over time, the stock market tends to go up. As you can see below, despite all of the misfortunes of the last century – war, social unrest, financial crises, geopolitical strife – the long-term trend of the stock market is largely unbroken.
While the country has endured all kinds of social, political and economic hardships, the market’s long-term positive trend is indisputable.
Market’s long-term positive trend
Through good times and bad, economic progress and the ingenuity of American companies have led to innovation, increased productivity and ultimately earnings growth that has driven the market higher.
That is not to say that the stock market cannot experience hard times, as the above chart clearly demonstrates. From World War II to the Great Financial Crisis, investors have had to endure painful drawdowns, intense bouts of volatility and highly uncertain futures. These cycles can make it hard to stay invested, particularly in a media environment prone to sensationalism and fear-mongering. But the long-term trend is irrefutable.
This is important because many investors get tunnel vision when it comes to the market. They look at how stocks have performed today, or this week, or this month. But by focusing on these individual trees, they’re missing the forest of consistent, long-term positive returns. Historically, the chance of the market (i.e., large cap stocks*) going up on any single day is barely better than a coin flip. But stretch your time horizon out, and the odds move in your favor: roughly 75% of single years are positive, nearly 90% of five-year stretches are positive, and 100% - 100! – of 20-year periods are positive (often, by quite a lot).
The truth is, the market has risen far more often than it’s fallen, as we display below, and while being a long-term investor is rarely easy, it has paid off handsomely over the last century.
While the market has certainly suffered down years, they’ve been far outweighed by good – and even great – ones.
Chart showing stock market rising more often than it follows.
Of course, no one can predict the future, and while the long-term historical trend of the stock market has consistently been positive, tomorrow's gains are not guaranteed. That is why working with a Baird Financial Advisor is so important. They are experts in crafting robust financial plans, building portfolios for all environments and helping you on the path to your long-term goals.
