Monroe Township NJ Estate Planning and Elder Law Attorney Blog | Neel Shah - Part 2
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Getting Married Midlife: Don’t Forget Your Estate

February 17, 2020

Filed under: Estate Planning — Laura Pennington @ 9:15 am

Getting married to someone in later years is becoming increasingly common. In fact, plenty of research studies are looking into how Millennials choices to get married later could have ripple effects across society and the economy. But there are other reasons you might get married later in life, too.

Pretty smiling older woman with a green frog in her hands. Concept for love in middle age, partnership or valentine.

But what about your own finances? Have you thought about how you’ll plan effectively for your estate when it’s been single living up until now? Most couples entering a marriage later in life have long managed their finances on their own and will have important decisions to make about how best to set up their new life together.

And one aspect of your newly joined partnership should include your estate planning documents. The choices you previously made about your beneficiaries, your power of attorney agent, and many more might have made sense when you were a single person. Perhaps you most recently updated them after a first marriage that ended in divorce.

But adding a new partner into your world calls you to be more effective in terms of planning with this new person on board. Will they be updating their documents to reflect your role in their life, too? How will you handle retirement accounts that both of you have likely accumulated over many years on your own? How do children from past marriages and relationships, if any, factor into these equations? These and many more important questions must be answered.

If you need a place to get started, a consultation with your estate planning lawyer is one of the most effective ways to ensure that you’ve covered all your bases in your planning. Sit down today with an estate planning attorney to discuss what needs to change and what should stay the same if you need to update your estate with your new spouse in mind.

Why You Need A Plan for Your Estate No Matter Your Stage in Life

February 12, 2020

Filed under: Estate Planning — Laura Pennington @ 12:34 pm

There are so many misconceptions surrounding the process and the need for estate planning. It’s all too easy to brush this off or assume that you don’t make enough money, aren’t old enough or don’t have enough unique considerations to put you at the top of your list for an estate planning priority. But these misunderstandings and misperceptions can have far-reaching implications for your loved ones, regardless of your current stage of life.

During College

During and right after college, it’s important to have necessary health care and medical power of attorney documents, including updated beneficiaries on all accounts, durable power of attorney for finances, and durable power of attorney for health care.

Getting Married

When getting married, it is important to expand your estate planning toolkit to include wills, like advance directives and updated beneficiaries on all accounts.

Starting A Family

Updating your will to ensure that you have appointed a guardian to step in and take care of your minor child if you are unable to do so is important. Other issues to consider include legacy building and the connection to your overall finances.

Scheduling a consultation with a knowledgeable estate planning lawyer today can help you to understand the many different ways that your life can be affected by estate planning. You can protect yourself and your loved ones.       

Update Your Estate Plan to Match SECURE

February 11, 2020

Filed under: Estate Planning — Laura Pennington @ 3:09 pm

A few impacts emerge from the Secure Act or the Setting Every Community Up for Retirement Enhancement; one of the biggest challenges associated with carrying on your estate plan following the implementation of the secure act is that this law eliminated a very popularly used estate tax strategy that previously applied to IRAs.

If a person who is not of age to take required minimum distributions from the IRA, inherit such an account, they could stretch withdrawals from their account over their lifetime, which was a popular strategy.

However, the elimination of this technique could force tax-deferred assets to be withdrawn sooner than anticipated, which could have big impacts on estate planning for those who had a lot of assets inside their retirement plan. This is just one reason why it is important to consider secure retirement and estate planning guided by the support of a knowledgeable attorney.

An attorney can have a big impact on the outcome of your estate planning, and it can also help to clarify what you need to know.

Now is the perfect time to review your beneficiary designation forms from any retirement accounts; you might need to update both your strategy as well as your decisions about who should receive those assets when something happens to you. 

Need help with your NJ estate planning? Our office is here to help you create a customized plan with your needs in mind. 

What You Should Know About New Jersey’s Inheritance Laws

February 10, 2020

Filed under: Estate Planning — Laura Pennington @ 1:53 pm

There is no longer an estate tax in New Jersey, but there is still an inheritance tax. This law has many different exemptions and complications, making it all the more important to retain an experienced New Jersey estate planning lawyer.

Until January 1st, 2018, New Jersey had both an estate tax and an inheritance tax. After that estate tax was repealed on January 1st, however, there is only an inheritance tax in addition to any applicable federal estate tax. If you are a family member of the deceased person, however, you could be exempted from the inheritance tax.

This is true if you are the mutually acknowledged child or stepchild, a great-grandchild, spouse, domestic partner, civil union partner or parent or grandparent of the deceased. Furthermore, inheritances that are left behind to schools, religious institutes, and charitable organizations are exempted from the inheritance tax.

There are many different federal and estate tax situations that you should incorporate into your overall estate planning. Beyond the state estate tax, you should also consider the federal estate tax returns, the federal estate and trust tax income return, income tax return, and the final state and federal income tax returns.

Make sure that you have had an experienced and knowledgeable New Jersey estate planning lawyer to review the basic requirements to ensure that your will is viewed as legitimate in New Jersey. There are a couple of different requirements that must be met in this effort. Schedule a consultation today with an experienced estate planning lawyer to learn more about how this can affect you.

What Happens When You Fail at Market Timing?

February 7, 2020

Filed under: Estate Planning — Raymund Rasco @ 2:16 pm

The impact of missing just a few of the market’s best days can be profound, as this look at a hypothetical investment in the stocks that make up the S&P 500 Index shows.

A hypothetical $1,000 turns into $138,908 from 1970 through the end of August 2019. Miss the S&P 500’s five best days and that’s $90,171. Miss the 25 best days and the return dwindles to $32,763. There’s no proven way to time the market—targeting the best days or moving to the sidelines to avoid the worst—so history argues for staying put through good times and bad. Investing for the long term helps to ensure that you’re in the position to capture what the market has to offer.

Hypothetical growth of $1,000 invested in US stocks in 1970

Sources: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

How to Fit Your Stepkids Into Your Estate Plan

February 5, 2020

Filed under: Estate Planning — Laura Pennington @ 1:34 pm

One of the most complicated facets of estate planning emerges when you’ve been married more than once or have children from a previous relationship. Naturally, whether or not you want to leave something behind for all your children and stepchildren is a personal decision and you can decide what’s best for you.

But if you do determine that you’d like to leave something for your stepchildren, it’s wise to discuss that situation with your estate planning attorney. Unfortunately, what tends to happen with most people who don’t consult an expert in which one set of children ends up taking everything and it all depends on how the estate plan was structured before the person passed away.

Make sure that you share with your attorney that some of those who are to receive your property when you pass away are stepchildren rather than blood relatives. Be as specific as possible in your plans about what you intend for them to have- these details make it easier to have your estate carried out as you wish in the future.

Don’t list that you want a piece of property or an amount of money to be split among “your children.” List out their names directly so that it’s very clear you did intend to include- or exclude- certain people in your will

It can also be helpful to establish a trust for estate planning purposes if you have complex concerns like how to pass on assets to stepchildren. 

If you want everyone to share things, you need to delve into the details and make sure that your lawyer has reviewed your proposed will or drafted it directly. Don’t let your loved ones end up embroiled in an estate planning dispute in the courts that could decimate your assets or leave someone out in the cold if that’s not what you intended.

Does an Executor of an Estate Have to Use an Attorney to Execute the Will?

February 4, 2020

Filed under: Estate Planning — Laura Pennington @ 1:39 pm

When you are appointed as the executor of an estate, it is important to review the instructions from the person who created this document.

When you create your own estate, you leave behind instructions for how your property should be distributed when you pass away, but you also nominate a person to administer your estate. This executor plays an important role in gathering all of your estate property, making distributions to will beneficiaries and paying estate debts.

In order for a will to be classified as legally valid and effective, it needs to be submitted to a court for probate. Whether or not an executor should use an attorney to shepherd the will through the process of probate might differ from one state to another.

For example, in New Jersey, it can make sense to retain a probate lawyer right away if the estate is complex. However, there are other states where it is the executor’s discretion about whether or not he or she intends to hire someone to assist with the administration of the estate. It is a good idea to retain an experienced and knowledgeable attorney when going through this process.

An attorney can play an important role in explaining the process to the person appointed as executor and can help to answer any questions that emerge in this early phase of estate planning. Scheduling a consultation with a trusted estate planning lawyer can be instrumental in helping you to accomplish your intentions.

What Can You Learn from the Biggest Celebrity Estate Mistakes?

February 3, 2020

Filed under: Estate Planning — Laura Pennington @ 12:52 pm

It seems like every few months another celebrity is covered in the news with an estate planning mess. With the recent passing of Kobe Bryant, it’s possible that his estate could wind up in a similar situation. Even many people with plenty of reason to consider estate planning end up putting that process off and leaving their family to handle the consequences.

Celebrities throughout recent history have provided plenty of case studies for what not to do with your estate. A couple of examples from the biggest estate blunders:

  • Michael Jackson, who passed away in 2009 but whose estate is still tied up in litigation due to valuation differences from estate executors and the IRS.
  • Prince, whose estate has already racked up 45 million in legal costs before any beneficiary has even received one dollar.
  • Ted Williams, who had confusing instructions about what he wanted done with his body, leaving his head to be removed and cryogenically frozen.
  • James Gandolfini, the actor who played mobster Tony Soprano, took some forward steps with estate planning like using an irrevocable live insurance trust, but failed to follow through all the way prior to his death. This led the estate to pay millions in unnecessary taxes.
  • Barry White, who passed away in 2003 and due to not updating his estate planning documents, left everything to the wife he was separated from rather than his girlfriend, the same woman who was mother to his nine children.

As you can see, there are a lot of ways to go wrong with estate planning. Each situation is different and your estate plan should consider the unique aspects of what you want to accomplish and your family and charitable intentions. If you’d like to carve out time to talk with a qualified estate planning law firm, schedule a meeting with our office today.

Mind Your Business

February 1, 2020

Filed under: Estate Planning — Raymund Rasco @ 1:47 pm

What will happen to the family business when you’re not around?

Simple, my children will take helm and run it JUST LIKE I DID! Are you 100% sure that’s what will happen? 9 out of 10 times when the owner passes or becomes incapacitated, everyone has their own ideas on how they’re going to run the family business. And, if there are multiple children involved, who’s going handle the many aspects of running the business like, marketing, advertising, networking, etc. The scenario becomes even more scary when the children cannot agree on who’s more competent to lead. Family relationships are often severed due to these disagreements. Why leave it to chance? Why not plan ahead and leave exact instructions on who will do what.

If we can help you or your loved ones to safeguard your most prized assets: RELATIONSHIPS, then feel free to call, email or use the link below to schedule a time to speak with me.

What Happens If My Long-Term Care Policy Lapses?

January 31, 2020

Filed under: Estate Planning — Laura Pennington @ 7:19 am

If you were under the impression that Medicare will continue to provide for your long-term care needs, including payments to a nursing home, this could be a catastrophic mistake that follows a missed premium due to your long-term care insurance policy.

Not paying your long-term care insurance policy premiums eventually gives that company license to cancel your policy. This means that after the grace period has expired, you will not be able to use that policy for long-term care expenses. If you have a policy and it lapses, the specifics of how that process is handled falls to your insurance company.

The insurance company, however, could potentially reinstate your policy back to the dated lapse if you request reinstatement and can show that there is no change in health since the time your policy lapsed. In addition, you will need to pay all past due premiums at that point in time. There are usually four primary opportunities to keep your long-term care policy active.

These include paying your premium on time regularly, paying within the policy grace period after a payment has lapsed, responding to a written lapse notice submitted to you by the insurance company, and requesting reinstatement after the policy has lapsed. If your policy has lapsed and you have not been able to get it reinstated, you will not be eligible to tap into the benefits provided by the long-term care insurance company.

Once your policy has lapsed and is no longer eligible for reinstatement, you will have to use another avenue to pay for your long-term care insurance expenses. Remember that Medicare does not cover long-term care insurance payments that go to a nursing home. Schedule a consultation with an experienced elder law attorney to discuss your case in further detail.        

I’ve Avoided Probate, But Have I Missed Anything Else?

January 30, 2020

Filed under: Estate Planning — Laura Pennington @ 8:15 am

Avoiding probate has many different factors that could lead you to search out services and opportunities to avoid this process. However, it’s not the magic answer that addresses every problem that could show up after you pass away. These common misconceptions could make it more difficult for your loved ones in the future.

First of all, we recognize that avoiding probate doesn’t mean avoiding taxes. Those two activities and the management of each are not related at all. If you leave a lot at your death or give away a lot of money during the course of your life, this could trigger certain taxes, even though most people don’t need to think about the federal gift and estate taxes. Your family’s right to inherit is also not impeded by the probate process.

In certain circumstances, family members have a right to claim part of the property that you leave behind at your death. Not all techniques that you think will avoid probate actually. This is why it is important to consult with an attorney to draft a comprehensive plan for accomplishing your goals. Spouse and children rights are two of the most prominent. Finally, avoiding probate does not free you or your estate from the payment of legal obligations to your creditors.

If you don’t leave behind enough assets to pay your taxes and debts, any assets outside of probate could be subject to creditor claims after you pass away.

Creditors do only have a certain period of time to submit formal executor claims. A creditor who has been appropriately notified of the probate court proceeding is not eligible to file a claim after the deadline passes.       

How Does a Payable on Death Bank Account Work?

January 29, 2020

Filed under: Estate Planning — Laura Pennington @ 2:02 am

There are many different ways that you can protect your interests and money and keep it outside of probate. In order to do this, it is your responsibility to consider the benefits of a payable on death bank account.

Do you need a payable on death bank account for estate purposes?

You will need to notify your bank about who you intend to inherit the money inside the account or a certificate of deposit. Your bank will manage this process directly, although there may be paperwork for you to fill out. The beneficiary you name and the bank will manage the rest, enabling the assets inside these accounts to avoid probate altogether.

So long as you are still alive, the individual you name to inherit the money in a payable on death bank account has no formal right to it. If you change your mind about leaving it to the person you named as the beneficiary or if you need the money, you can name a different beneficiary, close the account or spend the money. There are many benefits to a payable on death bank account, including it costs virtually nothing, there’s no limit on how much money can be left in this way, it’s easy to create, and it is relatively easy for the beneficiary to claim the money after the owner of the account dies. As a downside, a payable on death account might not accomplish all of your estate planning goals. You cannot name an alternate beneficiary, for example, which could be accomplished by establishing a trust.         

Splitting Up Assets for Your Children: Considering Special Needs

January 28, 2020

Filed under: Estate Planning — Laura Pennington @ 12:54 pm

There are many different circumstances that might prompt you to consider whether leaving an unequal estate plan to your children is recommended. Every family has different dynamics that must come into account when contemplating how to proceed with estate planning.

Special needs planning requires care

If you have a child with special needs, this should prompt you to schedule a consultation with an experienced estate planning lawyer. It can be very difficult to anticipate the type of care that a child with special needs might need in the future, as well as what types of public resources or benefits might be available to them.

You might discuss with your estate planning attorney the opportunity to create a special needs trust in addition to avoiding making other estate planning mistakes that could compromise your child’s eligibility for government benefits. Regardless of how you design the plan, this could also impact the assets left behind for your other loved ones.

It is likely that you will leave a larger portion of your assets to a child who has special needs than his or her siblings. While your child with special needs might also have siblings who love him or her and agree with the plan for long term care, you cannot rely on these siblings alone to take care of a child who has additional needs.

Removing your other children from any other financial burdens associated with that child can give you and your loved ones peace of mind.        

Organize Your Assets Before Tackling Estate Planning

January 27, 2020

Filed under: Estate Planning — Laura Pennington @ 11:39 am

If you’re like most people, you’ve got a long list of things you want to accomplish in 2020. Some of these are ongoing tasks and others involve sitting down and knocking out one big project. If estate planning and writing your will fall somewhere on your list, one of the most important things you can do to create forward moment on that is to organize your assets first.

When your assets are easily laid out so you know what you’re working with, you’re in a better position to speak to your estate planning lawyer about how to use wills, trusts, powers of attorney, and other estate planning documents to protect your interests. It’s too difficult to ensure your plan lines up with your needs if you don’t know what you’re working with when you start.

Since most people won’t trigger the federal estate tax, they tend to underestimate their assets. Pull all of your most recent statements together for your money markets, banks, brokerage accounts, stocks, IRAs, life insurance, bonds, and annuities.

Don’t forget about all those assets that fall outside the umbrella of accounts. What about your firearms? Your personal collection of art? Vehicles titled under your name? Real property including your home and any other properties beyond it? Business interests? Some of these assets require more complex estate planning and you can’t afford to overlook them.

Once you have an idea of the big picture, your estate planning attorney might recommend specific tools or strategies depending on what you want to do with the property. Do you intend to pass it on to someone in your family? Make sure it’s of the highest value when you pass it on to charity?

No matter what your goals are, it all begins with knowing exactly what falls inside your estate. If you need help crafting this list, consider setting up a meeting with an estate planning lawyer today.

“Funding” your Plan: Asset Alignment

January 24, 2020

Filed under: Estate Planning — Raymund Rasco @ 4:41 pm

You’ve signed your Estate Planning Documents, CONGRATULATIONS!!! BUT…  

  • Signed Documents 
  • Estate Plan Constructed 
  • Pat on Back ✔ 

Why the BUT??? Because there is one more important item left to be checked off on your list: Asset Alignment.

Let’s explore an analogy of purchasing a home. You have furniture but, all your furniture is on your front lawn. Are you finished? No. You have to move your furniture into your home. Well, it’s the same with creating an estate plan and not ‘moving’ your assets into the plan. 

Aligning your assets into your estate plan is an essential step that is often abandoned. Whether it’s changing the title on your account or changing beneficiaries, it’s important to complete the process by aligning the assets and optimizing your plan. Let us guide you in moving your ‘furniture into your home’ and check off Asset Alignment on your list.

How Is the SECURE Act Really Going to Change the Scope of Estate Planning?

January 23, 2020

Filed under: Estate Planning — Laura Pennington @ 1:41 pm

The SECURE Act is designed to help address many of the current issues related to retirement in the united states. This could have significant implications for your current estate plans.

From a taxpayer’s perspective, there is both pros and cons associated with the Setting Every Community Up for Retirement Enhancement Act of 2019. More employees are able to save for retirement and many small employers are more easily able to create 401(k) retirement plans under this new law.

However, the one of the biggest downside of the SECURE Act is the elimination of the stretch out IRA, which was enjoyed by death beneficiaries who were not spouses who inherited individual retirement accounts or 401(k) retirement plans. The stretch out tax deferral rules are still applicable for 401(k)s and IRAs that were inherited before 2020. Under the new law, however, the vast majority of death beneficiaries who were not spouses require to get full distribution of the inherited IRA within no more than 10 years after the death of the original account holder.

If you are curious about how this process applies to you and whether this impacts your estate planning, schedule a consultation with a dedicated estate planning lawyer today.      

Does A Young Family Really Need Estate Planning?

January 22, 2020

Filed under: Estate Planning — Laura Pennington @ 9:15 am

The first time that most people approach the subject of creating an estate plan is when they have some sort of a family member that might be relying on them financially. The most common situations for this include a spouse or a new child.

A young married couple with a newborn baby might recognize that they need a will, but they might not understand how a will can be leveraged appropriately with the support of an estate planning attorney to accomplish family related goals.

Younger couples, including those with minor children, should have at least two concerns, including:

  • Who will become the guardian of the children if both parties pass away?
  • How will the children be supported financially after they are gone?

The execution of a will enables parents to name a guardian for their young children if they pass away while the children are still minors. There are many different factors to consider in selecting an appropriate guardian for your minor children. Executing a will also helps to accomplish the second task of allowing the couple to specify how they want property to be distributed after their death.

Most people assume that the will in and of itself is enough to accomplish their estate planning goals, but as many young families can attest, it goes farther than this and might often require other documents and estate planning strategies.

This is where it becomes extremely important for an estate planning attorney to assist in the process of helping this young family adjust to their new and exciting circumstances.

Have You Put Elder Law Planning Off?

January 21, 2020

Filed under: Estate Planning — Laura Pennington @ 4:13 pm

It’s very easy to find other things to focus on in today’s modern life. Furthermore, it’s harder to fit elder law estate planning into your overall schedule because it feels too far off into the future, too complicated or even too final.

Regardless of whatever objection you have about the prospect of doing your elder law estate planning, this could lead to unexpected and challenging results that will affect you and your loved ones.

One common pitfall of avoiding elder law planning is that your life savings might end up going towards nursing home costs, if you or your spouse have a sudden need for intensive nursing home care. Another challenge associated with failure to complete your elder law planning is seeing your assets go to people you didn’t intend to have them when you pass away.

It can be a very personal and relatable goal to accomplish your elder law estate planning. In fact, this entire process begins by creating documents that help you to take control of your assets and your lives. These assets must be planned for both in terms of potential disability or death.

This reduces relationship destruction and any pain associated with your loved ones trying to handle the prospect of closing out your final affairs or making difficult decisions if something happens to you. Schedule a consultation with an experienced elder law attorney today to learn more about the options available to you.       

A Tale of Two Decades: Lessons for Long‑Term Investors

January 20, 2020

Filed under: Estate Planning — Raymund Rasco @ 5:12 pm

The first decade of the 21st century, and the second one that’s drawing to a close, have reinforced for investors some timeless market lessons: Returns can vary sharply from one period to another. Holding a broadly diversified portfolio can help smooth out the swings. And focusing on known drivers of higher expected returns can increase the potential for long‑term success. Having a sound strategy built on those principles—and sticking to it through good times and bad—can be a rewarding investment approach.


Looking at a broad measure of the US stock market, such as the S&P 500, over the past 20 years, you could be forgiven for thinking of Charles Dickens: It was the best of times and the worst of times (see Exhibit 1).

For US large cap stocks, the worst came first. The “lost decade” from January 2000 through December 2009 resulted in disappointing returns for many who were invested in the securities in the S&P 500. An index that had averaged more than 10% annualized returns before 2000 instead delivered less‑than‑average returns from the start of the decade to the end. Annualized returns   for the S&P 500 during that market period were −0.95%.

Yet it was a good decade for investors who diversified their holdings globally beyond US large cap stocks and included other parts of the market with higher expected returns—companies with small market capitalizations or low relative price (value stocks). As Exhibit 2 shows, a range of indices across many other parts of the global market outperformed the S&P 500 during that time span.


The next period of nine‑plus years reveals quite a different story. It has looked more like best of times for the S&P 500, as the index, when viewed by total return, has more than tripled since the start of the decade in the bounce‑back from the global financial crisis. US large cap growth stocks have been some of the brightest stars during this span. Accordingly, from 2010 through the first half of 2019, many parts of the market that performed well during the previous decade haven’t been able to outperform the S&P 500, as Exhibit 3 displays. Since many of these asset classes haven’t kept pace with the S&P, these returns might cause some to question their allocation to the asset classes that drove positive returns during the 2000s.


It’s been stated many times that investors may want to take a long‑term perspective toward investing, and the performance of stock markets since 2000 supports this point of view. Over the past 19½ years (see Exhibit 4), investing outside the US presented investors with opportunities to capture annualized returns that surpassed the S&P 500’s 5.65%, despite periods of underperformance, including the most recent nine‑plus years. Cumulative performance from 2000 through June 2019 also reflects the benefits of having a diversified portfolio that targets areas of the market with higher expected returns, such as small and value stocks. And it underscores the principle that longer time frames increase the likelihood of having a good investment experience.

No one knows what the next 10 months will bring, much less the next 10 years. But maintaining patience and discipline, through the bad times and the good, puts investors in position to increase the likelihood of long‑term success.

Sources: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

Key Questions for the Long-Term Investor

January 17, 2020

Filed under: Estate Planning — Raymund Rasco @ 4:42 pm

Whether you’ve been investing for decades or are just getting started, at some point on your investment journey you’ll likely ask yourself some of the questions below. Trying to answer these questions may be intimidating, but know that you’re not alone. Your financial advisor is here to help. While this is not intended to be an exhaustive list it will hopefully shed light on a few key principles, using data and reasoning, that may help improve investors’ odds of investment success in the long run.                                                                                                                   

  1. What sort of competition do I face as an investor?

The market is an effective information-processing machine. Millions of market participants buy and sell securities every day and the real-time information they bring helps set prices. This means competition is stiff and trying to outguess market prices is difficult for anyone, even professional money managers (see question 2 for more on this). This is good news for investors though. Rather than basing an investment strategy on trying to find securities that are priced “incorrectly,” investors can instead rely on the information in market prices to help build their portfolios (see question 5 for more on this).

2. What are my chances of picking an investment fund that survives and outperforms?

Flip a coin and your odds of getting heads or tails are 50/50. Historically, the odds of selecting an investment fund that was still around 20 years later are about the same. Regarding outperformance, the odds are worse. The market’s pricing power works against fund managers who try to outperform through stock picking or market timing. One needn’t look further than real-world results to see this. Based on research*, only 23% of US equity mutual funds and 8% of fixed income funds have survived and outperformed their benchmarks over the past 20 years.

3. If I choose a fund because of strong past performance, does that mean it will do well in the future?

Some investors select mutual funds based  on  past returns. However, research shows that most funds in the top quartile (25%) of previous five-year returns did not maintain a top-quartile ranking in the following five years. In other words, past performance offers little insight into a fund’s future returns.

4. Do I have to outsmart the market to be a successful investor?

Financial markets have rewarded long-term investors. People expect a positive return on the capital they invest, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation. Instead of fighting markets, let them work for you.

5. Is there a better way to build a portfolio?

Academic research has identified these equity and fixed income dimensions, which point to differences in expected returns among securities. Instead of attempting to outguess market prices, investors can instead pursue higher expected returns by structuring their portfolio around these dimensions.

6. Is international investing for me?

Diversification helps reduce risks that have no expected return, but diversifying only within your home market may not be enough. Instead, global diversification can broaden your investment opportunity set. By holding a globally diversified portfolio, investors are well positioned to seek returns wherever they occur.

7. Will making frequent changes to my portfolio help me achieve investment success?

It’s tough, if not impossible, to know which market segments will outperform from period to period. Accordingly, it’s better to avoid market timing calls and other unnecessary changes that can be costly. Allowing emotions or opinions about short-term market conditions to impact long-term investment decisions can lead to disappointing results.

8. Can my emotions affect my investment decisions?

Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions.

9. Should I make changes to my portfolio based on what I’m hearing in the news?

Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad. If headlines are unsettling, consider the source and try to maintain a long-term perspective.

10. So, what should I be doing?

Work closely with a financial advisor who can offer expertise and guidance to help you focus on actions that add value. Focusing on what you can control can lead to a better investment experience.

  • Create an investment plan to fit your needs and risk tolerance.
  • Structure a portfolio along the dimensions of expected returns.
  • Diversify globally.
  • Stay disciplined through market dips and swings.

Sources: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

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