It’s June, 2024 and we have the most important election in the history of the United States. Again. The United States won’t survive if ______ (choose your name) is elected. Again. The market will crash if ______ (choose your name) is elected. Again. I need to make sure my investments are protected against _____ (choose your name) getting elected. I can find statistical support for both sides of each statement.
This is not an article about politics. In fact, if anything it’s an anti-politics article. I have my own personal beliefs, and so do many/most adults. So do account managers, hedge fund managers, individual investors, and even the Chairman of the Federal Reserve. I don’t claim to know what those beliefs are, nor do they impact the recommendations I would give to clients. And that’s my point. Politics are like sports. You can enjoy watching and even participating. You can spend days poring over your favorite team’s statistics or run a fantasy team and only pay attention to individual players. You can try to earn a couple extra dollars by betting or attempt to make a living as a gambler. Maybe you just buy squares for the big game and complete a college basketball bracket every year. In all these situations, the bottom line is that you can’t determine the outcome of the games based on your beliefs, preferences, or research. You are completely at the mercy of the players in the game and the officials. The ups and downs of this lifestyle is more than many people can take. So, am I saying politics won’t have an effect on your investments, or that there is nothing you can do to improve your performance in an election year? Not at all. My point is that understanding your goals, your risk tolerance and your time horizon will allow Majestic Financial to help make sure your money is allocated in the best way for you. And if your money is properly allocated, a short-term change in the markets shouldn’t lead to a long-term negative impact on your money. For some clients, this may be all they need – continued long term growth with minimal volatility. Some clients want to take advantage of the short-term volatility and political changes. We can work with both, but these are two different strategies. The first client may be well served by owning an allocation that is balanced towards growth, holding mutual funds and exchange traded funds that shouldn’t change daily, weekly, or possibly for months at a time. There are set strategies within the funds that allow us to evaluate why that fund is appropriate for the client’s goals and risk tolerance. It is not a tactical strategy. As politics start to affect a company or sector, we are relying on the managers to adjust the holdings. But our goal is to not make major changes because the funds are already holding quality companies or fixed income. The second client may be an appropriate client for individual stocks and derivatives. This might be a more tactical strategy that changes monthly, and even adds/eliminates positions based on the political changes/trends. In this strategy, we may hold investments that we didn’t even look at 3 or 6 months prior, and we may not be holding them in another 6 months. We may shift sectors based on the actions of politicians or economic conditions rather than the historical performance of the companies. For the person who can’t handle their #1 seed losing in the third round, even if they can still win the pool, this may not be an ideal experience. So, what’s the point again? Don’t let the politics determine your investments. Let your goals determine the investment strategies and either enjoy or ignore politics without worrying about mixing the two. Written by Sean Budlong, CFP®, AAMS, Chief Executive Officer, Majestic Financial, Financial Consultant, RJFS *Disclosures: Any opinions are those of Sean Budlong and not necessarily those of RJFS or Raymond James. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This material is being provided for information purposes only and does not constitute a recommendation. Expressions of opinion are as of this date and are subject to change without notice. Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. Changing market conditions can create fluctuations in the value of a mutual fund investment. In addition, there are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly. ETF shareholders should be aware that the general level of stock or bond prices may decline, thus affecting the value of an exchange-traded fund. Although exchange-traded funds are designed to provide investment results that generally correspond to the price and yield performance of their respective underlying indexes, the funds may not be able to exactly replicate the performance of the indexes because of fund expenses and other factors. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. How often do you want to talk to your financial company? What questions do you want to answer? How many decisions do you want to have to make in your portfolio?
Over the past 15 years, I have heard countless clients tell me “I pay you to make those decisions” when I ask them about what they want to buy or sell in their portfolio. This doesn’t mean the clients don’t care about what they own or how well their portfolio performs. It simply means they want us to do the job that they hired us to do. These questions and that statement go to the heart of determining whether a client should be in a discretionary or non-discretionary account. A discretionary account is one that allows the financial professional to make decisions for the client. While the advisor must do what’s in the client’s best interests, there is no need for a conversation prior to placing trades. At Raymond James Financial Services, Majestic Financial had to apply for discretionary authority and document our processes for evaluating investments before we could act in this manner. The process took over a year and comes with a higher fiduciary responsibility. After all, it’s simpler to claim the client “told me to sell XYZ stock” than to learn enough about a client’s needs, risk tolerance, and preferences to choose investments that will help them reach financial goals. Not all financial firms allow discretion at the advisor level – some only allow the home office to use discretion. Clients at firms that don’t allow discretion are often surprised that Majestic Financial has discretionary authority because they have never experienced anything other than constant phone calls from the advisor. Some financial advisors don’t want the responsibility of discretionary authority. In some cases, advisors will shift the responsibility for portfolio decisions to an outside third party which may create a form of discretion. At Majestic Financial we embrace the responsibilities and duties that come with discretionary accounts. Brandon, Leon and Sean meet every 4 months to do research on investments and portfolios to help ensure our clients are in alignment with their goals and risk tolerance. We make changes to investments when they are no longer performing to our expectations or when we believe the market/economy has shifted. We also add portfolios that align with the changing needs/desires of our clients. The Faith Based portfolios are an example of expanding our offerings to meet client preferences. With that being said, not all clients should be in discretionary accounts. Some clients will have concentrated positions (30% of their portfolio is in one stock, or they love technology and it makes up 50% of their stocks). If you prefer monthly or quarterly portfolio reviews (not conversations about goals, financial plans, etc) or want to have input on any and all changes to your account, non-discretion is the way to go. However, a client shouldn’t expect both in the same account. You can’t tell us “I am paying you to make the decision but consult with me before making any changes.” This would be non-discretion in a discretionary account and would cause compliance issues. We are proud of the work we do for clients at Majestic Financial. We want to make sure that the account type meets your goals, needs, and personality. If you believe that you are in the wrong account, please contact us and have that conversation. It’s your money, but you hired us for a reason. Written by Sean Budlong, CFP®, AAMS, Chief Executive Officer, Majestic Financial, Financial Consultant, RJFS Disclosures: *Any opinions are those of Sean Budlong and not necessarily those of RJFS or Raymond James. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk and you may incur a profit or loss regardless of strategy selected. *In a fee-based account, clients pay a quarterly fee, based on the level of assets in the account, for the services of a financial advisor as part of an advisory relationship. In deciding to pay a fee rather than commissions, clients should understand that the fee may be higher than a commission alternative during periods of lower trading. Advisory fees are in addition to the internal expenses charged by mutual funds and other investment company securities. To the extent that clients intend to hold these securities, the internal expenses should be included when evaluating the costs of a fee-based account. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs. A list of additional considerations, as well as the fee schedule, is available in the firm's Form ADV Part 2 as well as the client agreement. Majestic Financial's Three Year AnniversaryThree years ago this week, I was feeling serious pressure. Brandon and I had decided to leave our former firm and create a new company – Majestic Financial. The idea was truly Brandon’s and his enthusiasm won me over. The world was trying to fight its way out of a pandemic and many financial offices had not even re-opened to in person appointments. Laurie and Kendra agreed to make the move with us, and on April 12, 2021, Majestic was officially open. Josh created our logo, the ladies chose our colors, and we all had input on our build-out of the office.
Over the next 60 days Leon, Jaime, Alyx, and Becky joined the company. The work was overwhelming – Laurie and I worked seven days a week, mostly 10-hour days. We made many mistakes in the processing of new clients to Majestic. We never had the chance to get trained on the intricacies of account processing until almost a year passed because the normal training was on pause due to COVID. We physically moved into our office at a time when most companies were still having work done remotely. As we fielded daily calls from people wanting to become Majestic clients, the markets slid into a 24 month bear condition. So as people were getting experience with this new company, they were also seeing their portfolio values drop. Luckily, most of our clients understood that when the overall market drops our job becomes more defensive rather than growth based. I believe we did that job very well. As I write this on April 3, 2024, I am humbled and amazed at how Majestic has evolved. The chaos of 2021 has turned into solid processes for both current and new clients. Any client who knows me realizes that I shouldn’t be doing processing, but in 2021 I was opening accounts. Today, every employee of Majestic has a specific role to play and can fill in for each other to make sure nothing falls through the cracks. Isiah joined Josh to create client events that span the spectrum from charity golf outings to creating personal fragrances. I believe we have the best staff in the financial world in our geography. I am proud of them every day. Why did we have only three clients leave the firm during a 24-month bear market? When we created Majestic, we specifically wanted to be able to invest in the best way possible to enable clients to meet their financial goals. So, when the market turned and stayed negative, we weren’t forced to simply shrug and say, “stay invested, it will eventually turn around.” Instead, we added structured investments, options, and indexed annuities. All three of these investments were brand new to clients – they had no experience with any of them in their old portfolios. As Majestic Financial enters its fourth year of existence, we continue to look for new ways of helping clients. Brandon is leading the faith-based portfolios. Kendra and I continue to add options strategies. I don’t believe we will ever stop growing and learning, which should only continue to help clients. Thank you for joining us on this adventure and I look forward to many more years of working together. Written by Sean Budlong, CFP®, AAMS, Chief Executive Officer, Majestic Financial, Financial Consultant, RJFS Disclosures: *Any opinions are those of Sean Budlong and not necessarily those of RJFS or Raymond James. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Three months ago, sitting down to write an article for the newsletter, UM was preparing to play for the National Title, and the Detroit Lions were getting ready to play in a playoff game. Today, the first two rounds of March Madness have been completed, and my bracket in the Majestic Financial challenge is already busted. The Otsego JV baseball team (I am an assistant coach) plays their first game of the season against Allegan, and I hope I have packed enough layers of clothing.
It may seem like my life revolves around sports, and to an extent that’s true. But what fascinates me so much about sports is the same thing that fascinates me about investments – options specifically. Sports are simple at their core – you play a game and one side wins, one side loses. The opposing teams play by the same rules, share the same playing field, and deal with the same arbitrators of justice (referees or umpires). Theoretically, there should not be any upsets since the games should come down to a simple matter of skill. However, the strategies and momentum are what makes sports…well sports! An Oakland University (without a single top recruit) can beat the storied University of Kentucky (starting 5 high school All Americans) by showing a defense that they didn’t play all year and feeding a hot 3-point shooter. The Detroit Lions can make it to the NFC Championship game by running variations of blitzes that were never shown during the regular season. What also intrigues me is that the upsets very seldom turn into championship stories. Oakland lost (in overtime) their next game, the Lions lost to the 49rs. Investing is the same situation, just more serious in nature. The theory is simple – buy low, sell high. Buy quality companies, maintain the proper asset allocation, increase your contributions when you can. Easy, right? But the strategies are endless and should be based on individual needs, risk tolerance, and goals. Are we selling call options, buying put options, tax harvesting? Are we selling or buying into a stock split or stock buyback? Are we making a trade to potentially take advantage of coming interest rate cuts, and are we using options for this strategy? At Majestic Financial, we are not investing for clients to make a quick buck, just like I wasn’t putting money on the Oakland University Grizzlies to make it to the Final Four. We want to use strategies designed to help maximize returns that our clients want and need without increasing risk. Our strategies may seem extreme while you are on the phone, in a zoom meeting, or talking with us in person and we are explaining them. But that is only because we are not afraid to find a different way of investing than you may have done in the past. As we head into the Presidential election, potential rate cuts, and continuing wars around the globe, remember that we are here to work with and for you. We want you involved in the plan and decisions. Unlike my NCAA bracket, we want to help you succeed for the long term. Give us a call and let’s talk strategies. Written by Sean Budlong, CFP®, AAMS, Chief Executive Officer, Majestic Financial, Financial Consultant, RJFS Disclosures: *Any opinions are those of Sean Budlong and not necessarily those of RJFS or Raymond James. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk and you may incur a profit or loss regardless of strategy selected. We are all aware of how the world around us has changed over the last 3, 10, and 20 years. Technology is King, and almost everything can be “Googled,” instead of learned. Car broke down, Google “engine stopped running.” Feeling sick? Google “achy head and stuffy nose.” Don’t want to pay for someone to construct the deck? Google “easy deck construction.” Simple, right? Until you do more damage to your car, you find out you don’t have a cold but COVID instead, and your neighbor falls through the deck. Just because you can read about a skill online doesn’t automatically grant you the ability to use said skill.
The same is true of investing. Many of the people I talk to about Majestic have the assets they need to achieve their goals, and the intelligence to invest them in simple mutual funds. And if investing was as simple as going to a website and buying the one fund that will get you to your goal, everyone should fire us and google their way to financial freedom. However, we all know it’s not that simple. If you look at the 10 top companies (based on market capitalization) from 1980 to 2000 to 20023, there is not a single company from 1980 that appears in 2023. In fact, many of the companies from 1980 disappeared (most through mergers) prior to 2000. While a technology company has held the top spot in all three years, it’s changed each time. In 1980, IBM was the largest company in the world with a $35 Billion cap. In 2000, Microsoft took the top spot with a $586 Billion cap. Just 23 years later, Apple crossed the $3 Trillion cap level. Just as the companies that you would invest in changed, so did the companies you invest with. In 2000, there were a handful of companies that offered “on-line” investing, led by Goldman Sachs, Prudential, PaineWebber, Ameritrade, Schwab and E*Trade. Very few (relatively speaking) clients were interested in on-line anything – banking, shopping, or investing. In 2024, there are far too many on-line platforms to name. However, here are a few that may not be as well known but can be found on a google search: Betterment, Fundrise, Robinhood, Ally Invest, eToro, Firstrade, Yieldstreet, Tasty Trade, Stash. Each of these sites offer different hooks to get you in, levels of services and fees, and “advice.” All you have to decide is how much time and money you want to spend while working as your own financial analyst and broker. And that’s the reason we talk to prospective clients first – we are not interested in charging clients fees just for them to do it all themselves. We want to make investing easy and profitable even when we don’t control whether Exxon Mobil is the 5th largest company in the world (2000) or Saudi Aramco is the third largest (2023). We don’t want a client who wants to google “why didn’t I make as much as the S&P 500 in 2023?” We want to have that conversation about why they didn’t have every dollar in the portfolio invested in the Magnificent 7 (Google it…). We know that the online companies will allow you to pay them less money for the right for you to do all the work. We know that the online companies will allow you to pay them to use tools that may not be helpful in deciding if your money should be invested in ABC or XYZ company. At Majestic Financial, we want to actually help you reach financial goals, not offer you a second job you pay for. Not everyone needs a human advisor – or wants one. But we aren’t interested in that person as a client, and we won’t compete with Robinhood. So, Google all day long, and enjoy learning just enough to be dangerous. We will keep investing in the ways that make the most sense for our clients. And if anyone happens to talk to Laurie, please tell her I found easy instructions for remodeling bathrooms online. Written by Sean Budlong, CFP®, AAMS, Chief Executive Officer, Majestic Financial, Financial Consultant, RJFS Disclosures: *Any opinions are those of Sean Budlong and not necessarily those of RJFS or Raymond James. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk and you may incur a profit or loss regardless of strategy selected. *The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. |
This blog is a collective effort from the Majestic consultant trio, Sean Budlong, Brandon Wilkins, and Leon Bennett.
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