Among stock-market investors there’s long been a debate between those who favor value and those who favor growth.

Looking at their recent track records doesn’t do much to settle the debate. Over the past decade, as a whole, value stocks have not performed as well as growth stocks. But looking at a larger body of cumulative data, reaching as far back as 1926, this has not always been the case. Let’s dive in a little deeper.1

Investing for Value

Value investors look for bargains. That is, they attempt to find stocks that are trading below the value of the companies they represent. If they consider a stock to be underpriced, it’s an opportunity to buy. If they consider it overpriced, it’s an opportunity to sell. Once they purchase a stock, value investors seek to ride the price upward as the security returns to its “fair market” price – selling it when this price objective is reached.
Most value investors use detailed analysis to identify stocks that may be undervalued. They’ll examine the company’s balance sheet, financial statements, and cash flow statements to get a clear picture of its assets, liabilities, revenues, and expenses.

One of the key tools value investors use is financial ratios. For example, to determine a company’s book value, a value analyst would subtract the company’s liabilities from its assets. This book value can then be divided by the number of outstanding shares to determine the book-value-per-share – a ratio that would then be compared with the book-value-per-share of other companies in the same industry or to the overall market.

Investing for Growth

Growth investors are using today’s information to identify tomorrow’s strongest stocks. They’re looking for “winners” – stocks of companies within industries that are expected to experience substantial growth. They seek companies in a position to generate revenues or earnings greater than what the market expects. When growth investors find a promising stock, they buy it, even if it has already experienced rapid price appreciation, in the hope that its price will continue to rise as the company grows and attracts more investors.

Where value investors use analysis, growth investors use criteria. Growth investors are more concerned about whether a company is exhibiting behavior that suggests it will be one of tomorrow’s leaders; they are less focused on the value of the underlying company.

For example, growth investors may favor companies with a sustainable competitive advantage that are expected to experience rapid revenue growth, that are effective at containing cost, and that have an experienced management team in place.

Value and growth investing are opposing strategies. A stock prized by a value investor might be considered worthless by a growth investor, and vice versa. Which is right? A close review of your personal situation can help determine which strategy may be right for you.

1. Forbes.com, 2020
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Exchange-traded funds have some things in common with mutual funds, but there are differences, too.

The growth of exchange-traded funds (ETFs) has been explosive. In 2006, there were less than 1,000; by 2024, there over nearly 10,000 investing in a wide range of stocks, bonds, and other securities and instruments.1

At first glance, ETFs have a lot in common with mutual funds. Both offer shares in a pool of investments designed to pursue a specific investment goal. And both manage costs and may offer some degree of diversification, depending on their investment objective. Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline.

Structural Differences

Mutual funds accumulate a pool of money that is then invested to pursue the objectives stated in the fund’s prospectus. The resulting collection of stocks, bonds, and other securities is professionally managed by an investment company.

ETFs work in reverse. An investment company creates a new company, into which it moves a block of shares to pursue a specific investment objective. For example, an investment company may move a block of shares to track the performance of the Standard & Poor’s 500. The investment company then sells shares in this new company.2

ETFs trade like stocks and are listed on stock exchanges and sold by broker-dealers. Mutual funds, on the other hand, are not listed on stock exchanges and can be bought and sold through a variety of other channels — including financial professionals, brokerage firms, and directly from fund companies.

The price of an ETF is determined continuously throughout the day. It fluctuates based on investor interest in the security and may trade at a “premium” or a “discount” to the underlying assets that comprise the ETF. Most mutual funds are priced at the end of the trading day. So, no matter when you buy a share during the trading day, its price will be determined when most U.S. stock exchanges typically close.

Tax Differences

There are tax differences, as well. Since most mutual funds are allowed to trade securities, the fund may incur a capital gain or loss and generate dividend or interest income for its shareholders. With an ETF, you may only owe taxes on any capital gains when you sell the security. (An ETF also may distribute a capital gain if the makeup of the underlying assets is adjusted).3

Determining whether an ETF or a mutual fund is appropriate for your portfolio may require an in-depth knowledge of how both investments operate. In fact, you may benefit from including both investment tools in your portfolio.

Amounts in mutual funds and ETFs are subject to fluctuation in value and market risk. Shares, when redeemed, may be worth more or less than their original cost.

Mutual funds and exchange-traded funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

At a Glance

Mutual funds and exchange-traded funds have similarities — and many differences. The chart below gives a quick rundown.

1. ETFGI.com, July 17, 2024
2. The Standard & Poor’s 500 Composite Index is an unmanaged index that is generally considered representative of the U.S. stock market. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index.
3. Investopedia.com, February 16, 2024
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Learn how to coordinate your retirement accounts like an orchestra to help maximize your retirement strategy.

Key Takeaways

  • Understanding the retirement savings hierarchy can help maximize your limited dollars. Many financial professionals suggest prioritizing your 401(k) first, then your Traditional IRA, and finally, your taxable savings when determining how to allocate retirement funds.
  • Coordinating investments across accounts may enhance your overall strategy. Some approaches involve placing income-generating assets like bonds in tax-deferred accounts while using taxable accounts for growth-focused investments like stocks.
  • Your withdrawal strategy can impact your retirement income. Options include tapping taxable accounts first, withdrawing from poor performers, or using a tax-bracket approach, each with different potential benefits depending on your circumstances.

An orchestra is merely a collection of instruments, each creating a unique sound. It is only when a conductor leads them that they produce the beautiful music imagined by the composer.

The same can be said about your retirement strategy.

The typical retirement strategy is built on the pillars of your 401(k) plan, your Traditional IRA, and taxable savings. Getting the instruments of your retirement to work in concert has the potential to help you realize the retirement you imagine.1

Hierarchy of Savings

Maximizing the effectiveness of your retirement strategy begins with understanding the hierarchy of savings.

If you’re like most Americans, the amount you can save for retirement is not unlimited. Consequently, you may want to make sure that your savings are directed to the highest-priority retirement funding options first. For many, that hierarchy begins with the 401(k), is followed by a Traditional IRA, and, after that, extra money is put toward taxable savings.

Heirarchy of Savings

You will then want to consider how to invest in each of these savings pools. One strategy is to simply mirror your desired asset allocation in all retirement accounts.2

Another approach is to put the income-generating portion of the allocation, such as bonds, into tax-deferred accounts while using taxable accounts to invest in assets whose gains come from capital appreciation, like stocks.3

Withdrawal Strategy

When it comes to living off your savings, you’ll want to coordinate your withdrawals. One school of thought recommends that you tap your taxable accounts first so that your tax-deferred savings will be afforded more time for potential growth.

Another school of thought suggests taking distributions first from your poorer-performing retirement accounts since this money is not working as hard for you.

Finally, because many individuals have both traditional and Roth IRA accounts, your expectations about future tax rates may affect what account you withdraw from first. (If you think tax rates are going higher, then you might want to withdraw from the traditional before the Roth). If you’re uncertain, you may want to consider withdrawing from the traditional up to the lowest tax bracket and then withdrawing from the Roth after that.4

Withdrawal Strategy

In any case, each person’s circumstances are unique, and any strategy ought to reflect your particular risk tolerance, time horizon, and goals.

 

1. In most circumstances, you must begin taking required minimum distributions from your 401(k), Traditional IRA, or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k), Traditional IRA or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. 401(k) plans and IRAs have exceptions to avoid the 10% withdrawal penalty, including death and disability. Contributions to a traditional IRA may be fully or partially deductible, depending on your individual circumstances.
2. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.
3. The market value of a bond will fluctuate with changes in interest rates. As rates rise, the value of existing bonds typically falls. If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity an investor will receive the interest payments due plus his or her original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
4. Roth IRA contributions cannot be made by taxpayers with high incomes. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Learn about key investment principles that will help you navigate the unpredictability of the financial markets.

Key Takeaways

  • Diversification can help manage investment risk, but it doesn’t eliminate it. The “don’t put all your eggs in one basket” approach may help reduce pressure when certain asset classes experience volatility.
  • Asset allocation strategies consider your individual circumstances. Financial professionals assess your goals, time horizon, and risk tolerance to help determine what asset classes may be appropriate for your situation.
  • Consistent investing through dollar-cost averaging may help build wealth over time. Most people invest regularly within their budget, understanding that markets fluctuate and focusing on long-term potential rather than short-term opportunities.

Regardless of how the markets may perform, consider making the following part of your investment philosophy:

Diversification

The saying “Don’t put all your eggs in one basket” has some application to investing. Over time, certain asset classes may perform better than others. If your assets are mostly held in one kind of investment, you could find yourself under a bit of pressure if that asset class experiences some volatility.

Keep in mind that diversification is an approach to helping manage investment risk. It does not eliminate the risk of loss if an investment’s price declines.

Cash Stocks Bonds

Asset allocation strategies also are used in portfolio management. When financial professionals ask you questions about your goals, time horizon, and tolerance for risk, they get a better idea about what asset classes may be appropriate for your situation. But like diversification, asset allocation is an approach to help manage investment risk. It does not eliminate the risk of loss if an investment sees a decline in price.

Patience

Impatient investors can get too focused on the day-to-day doings of the financial markets. They can be looking for short-term opportunities rather than longer-term potential. A patient investor understands that markets fluctuate, and has built a portfolio based on their time horizon, risk tolerance, and goals. A short-term focus may add stress and anxiety to your life, and could lead to frustration with the investing process.

Consistency

Most people invest a little at a time, within their budget, and with regularity. They invest $50 or $100 or more per month in their retirement account or similar investments. They are investing on “autopilot” to help themselves attempt to build wealth over time.

Investment inconsistencies

Consistent investing does not protect against a loss in a declining market or guarantee a profit in a rising market. Consistent investing, sometimes referred to as dollar-cost averaging, is the process of investing a fixed amount of money in an investment vehicle at regular intervals, usually monthly, for an extended period of time, regardless of price.
Investors should evaluate their financial ability to continue making purchases through periods of declining and rising prices. The return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.

If you don’t have an investment strategy, consider talking to a qualified financial professional today.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Tax preparation may be the perfect time to give the household budget a check-up.

Every year, about 140 million households file their federal tax returns. For many, the process involves digging through shoe boxes or manila folders full of receipts; gathering mortgage, retirement, and investment account statements; and relying on computer software to take advantage of every tax break the code permits.1

It seems a shame not to make the most of all that effort.

Tax preparation may be the only time of year when many households gather all their financial information in one place. That makes it a perfect time to take a critical look at how much money is coming in and where it’s all going. In other words, this is a great time to give the household budget a checkup.

Six-Step Process

A thorough budget checkup involves six steps.

  1. Creating Some Categories. Start by dividing expenses into useful categories. Some possibilities: home, auto, food, household, debt, clothes, pets, entertainment, and charity. Don’t forget savings and investments. It may also be helpful to create subcategories. Housing, for example, can be divided into mortgage, taxes, insurance, utilities, and maintenance.
  2. Following the Money. Go through all the receipts and statements gathered to prepare taxes and get a better understanding of where the money went last year. Track everything. Be as specific as possible, and don’t forget to account for the cost of a latte on the way to the office each day.
  3. Projecting Expenses Forward. Knowing how much was spent per budget category can provide a useful template for projecting future expenses. Go through each category. Are expenses likely to rise in the coming year? If so, by how much? The results of this projection will form the basis of a budget for the coming year.
  4. Determining Expected Income. Add together all sources of income. Make sure to use net income.
  5. Doing the Math. It’s time for the moment of truth. Subtract projected expenses from expected income. If expenses exceed income, it may be necessary to consider changes. Prioritize categories and look to reduce those with the lowest importance until the budget is balanced.
  6. Sticking to It. If it’s not in the budget, don’t spend it. If it’s an emergency, make adjustments elsewhere.

Tax time can provide an excellent opportunity. You have a chance to give your household budget a thorough checkup. In taking control of your money, you may find you are able to devote more of it to the pursuit of your financial goals.

1. IRS.gov, 2025
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Longer, healthier living can put greater stress on retirement assets; the bucket approach may be one answer.

 

John and Mary are nearing retirement and they have a lot of items on their bucket list. Longer life expectancies mean John and Mary may need to prepare for two or even three decades of retirement. How should they position their money?1

One approach is to segment your expenses into three buckets:

  • Basic Living Expenses— Food, Rent, Utilities, etc.
  • Discretionary Spending — Vacations, Dining Out, etc.
  • Legacy Assets — for heirs and charities

Next, pair appropriate investments to each bucket. For instance, Social Security might be assigned to the Basic Living Expenses bucket.2

For the discretionary spending bucket, you might consider investments that pay a steady dividend and that also offer the potential for growth.3

Finally, list the Legacy assets that you expect to pass on to your heirs and charities.

A bucket plan can help you be better prepared for a comfortable retirement.

Call today and we can develop a strategy that may help you put enough money in your buckets to complete all the items on your bucket list.

1. John and Mary are a hypothetical couple used for illustrative purposes only. Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline.
2. Social Security benefits may play a more limited role in the future and some financial professional recommend creating a retirement income strategy that excludes Social Security payments.
3. A company’s board of directors can stop, decrease or increase the dividend payout at any time. Investments offering a higher dividend may involve a higher degree of risk. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
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