Investing

Where Stock Returns Really Come From: Payouts, Valuations, and Growth

When investors look to the future, one of the hardest questions to answer is: What kind of returns can we expect from the stock market? In the short run, predicting equity performance is notoriously difficult. Market sentiment shifts quickly, economic data can surprise, and headlines often drive prices in ways that defy logic.But over longer periods, the fog begins to lift. Equity returns can be broken down into three clear and measurable components: shareholder payouts, valuation changes, and long-term earnings growth. While we can’t forecast next month or even next year with much accuracy, these building blocks provide a framework…
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After the Fall: What History Tells Us About Markets That Drop 25%

When the market drops 25%, it doesn’t just sting—it rattles us. Headlines scream recession, portfolios shrink, the normal group of permabears wake from their slumber to talk gold, and emotions take over. In those moments, it’s natural to wonder: Is this different? Should I get out before it gets worse?It's times like these that I look back to what history has shown us in the past to gain reassurance. History has a story to tell. And it's a story worth listening to. History of 25% Downturns Since 1950, there have been nine times when the U.S. stock market fell at least…
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A Brief History of the Ups and Downs of the Market

Investing in the stock market is a lot like riding a roller coaster—you know there will be drops, but that doesn’t mean your stomach won’t lurch when they happen. Every investor dreams of a smooth, uphill ride to wealth, but in reality, markets take detours, hit potholes, and sometimes feel like they’ve been hijacked by a mischievous toddler at the controls. Yet, history shows that those who hang on tight and resist the urge to jump off mid-ride are usually the ones who reach their destination with the best returns. On average, the S&P 500 has increased in price by…
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Stock Lending: Pros and Cons

Stock lending, also known as securities lending, is a feature offered by some brokerage platforms that allows investors to lend their shares to other market participants, primarily short sellers. In return, investors receive interest payments, offering a way to generate passive income without having to sell their holdings. Think of it like renting out your stock to someone else for a period of time.However, while this might seem like an effortless way to earn extra income, it comes with its own set of complexities and risks that investors should carefully consider. How Stock Lending Works When an investor participates in…
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Annualized Return versus Cumulative Return Explained

When evaluating the performance of an investment, two common metrics often come into play: annualized return and cumulative return. Understanding the differences between these metrics is crucial for accurately interpreting your investment's growth over time and comparing it to other opportunities.What Is Cumulative Return?Cumulative return measures the total percentage change in the value of an investment over a specific period. It represents the overall growth of the investment without considering how long it took to achieve that growth.Formula:Cumulative Return = (Ending Value−Beginning Value) / Beginning ValueExample:If you invest $10,000 and its value grows to $15,000 after five years, the cumulative return is:$15,000−$10,000 =…
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The Differences Between Short-Term and Long-Term Capital Gains

Capital gains occur when you sell an asset for more than its purchase price. The distinction between short-term and long-term capital gains is important for tax purposes, as each is treated differently under U.S. tax law. Short-Term Capital GainsShort-Term Capital Gains are gains from the sale of assets held for one year (365 days) or less are considered short-term.These gains are taxed as ordinary income, meaning the tax rate depends on your marginal tax bracket which is the highest tax rate applicable to you.  Currently, ordinary income rates range from 10% to 37%. For the latest rates, see Latest Ordinary Income…
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Understanding Estimated Capital Gains Distributions

Understanding Estimated Capital Gains Distributions Capital gains distributions are a critical aspect of mutual fund and exchange-traded fund (ETF) investing. They represent the profits a fund makes when selling securities that have appreciated in value. While distributions are a normal part of investing, understanding them and their timing can help investors manage their tax liability and align their portfolios with their goals. How Are Capital Gains Distributions Generated? Capital gains distributions occur when a mutual fund or ETF sells investments within its portfolio for a profit. These gains are classified as either: Short-term capital gains: Generated from securities held for…
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Understanding MYGAs: Multi-Year Guaranteed Annuities

A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that provides a guaranteed interest rate for a specified number of years. Similar to a Certificate of Deposit (CD), MYGAs are offered by insurance companies and are designed to provide a safe, predictable return on investment over the annuity's term, which can range from two to ten years. MYGAs are particularly attractive for individuals looking for a low-risk option to preserve their principal while earning a steady interest rate.How Does a MYGA Work?When you purchase a MYGA, you agree to invest a lump sum with an insurance company. In…
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Market Volatility Survival Guide

Market downturns are an inevitable part of investing. They can be stressful, but history shows that markets recover, often stronger than before. For long-term investors, the key to weathering downturns isn’t about avoiding losses altogether—it’s about staying invested, maintaining discipline, and following a solid strategy. Here’s how to navigate market volatility while keeping your financial goals on track. Here are some valuable tips for managing market volatility that are useful for investors of all levels: Volatility is Normal! Market declines are not an anomaly—they are a feature of investing. Historically, bear markets (a drop of 20% or more) occur roughly…
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Understanding Tax Implications for Investment Accounts

Understanding the different types of retirement accounts and their respective tax statuses is fundamental for effective financial planning and tax planning. This article offers a comprehensive overview of the four primary tax categories for different accounts each having distinct implications for investment growth and withdrawals.The reason understanding these terms is important as they impact how contributions, distributions, and earnings are taxed as well as other important considerations regarding the account.The four primary account tax categories are:Taxable AccountsTax Deferred AccountsTax-Free AccountsAfter-Tax Accounts  Taxable Accounts Contributions = Not Deductible Tax Deferred Growth = Depends Withdrawal Taxation = Gains Withdrawal Flexibility = Most…
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