Holiday Newsletter 2023

How Hidden Biases May Be Impacting Your Investment Decisions

This has been one of those years where we can suffer from a bias – where emotions control decision-making. Biases can hurt our long-term investment goals. Behavioral finance is a fascinating study of human behavior's impact on portfolio returns, financial plan outcomes and retirement savings. We all can find ourselves making investment decisions based on a bias driven by self-deception, social influence, emotion, and heuristic simplification. These biases impact decision- making and can hurt returns without us even realizing it. A study published in the Journal of Financial Planning (7/11/2021) found that individuals who leveraged a behavior modified approach that removed emotion from investing saw upwards of 23% higher returns over the course of 10 years.

Here are a few of the most common biases and examples:

Anchoring – relying on the first information you see. A pair of shoes for $1200 and next to it a pair for $100 – the second pair looks cheap in this context. If we’d seen just the $100 pair perhaps next to a $50 pair, we’d anchor to the first price and see the second price as cheap or a bargain. Anchoring is attaching a random number – not one with true significance or real value to our decision-making.

Hot Hand Fallacy Bias – Basing judgements about risk and return based on recent, singular information – making decisions based on what is happening now thinking that current trends are the best predictors of what will happen next. During a bull market most investors believe that stocks will continue to keep going up. In a bear market, they think that low returns will continue – forever. This is extrapolation bias or hot hand fallacy at work. The term came from casino gamblers betting more after winning than after losing. Gamblers believed their chance of winning a second time was greater than the first. I experienced this firsthand when a substantial lottery winner (seven figures!) who spent all but a few thousand of their winnings patted my hand and said calmly, “Don’t worry Jayne, we are going to win again.”  

Hindsight Bias – the misconception that one “always knew” they were right. They may mistakenly assume they possess special insight or talent predicting an outcome. Hindsight bias can prevent us from learning from mistakes.

Confirmation Bias – paying close attention to information that confirms a belief and ignoring information that contradicts it. It’s important to keep an open mind and consider information that may disprove a theory or idea to help guard against this bias. In investing for example, only listening to analysts that agree with your opinion of a stock.

Loss Aversion – being so fearful of losses that the only focus is on avoiding a loss more so than on making gains. Research shows that investors feel the pain of perceived loss more than twice as strongly as they feel the enjoyment of making a profit. This can lead an investor to hang onto a losing stock until they can “get even again” vs. perhaps repositioning the holding to a stock with a stronger outlook.

Narrative Fallacy – Abandoning facts, experience, historic information, and reason in favor of a “good story”. Hearing a financial person tell a good story about a particular company and putting more weight on the story than on the facts of the stock. This can also be applied to several situations and people – abandoning our personal experience and knowledge of a person or place for a false narrative that makes a “good story”.

MARKET INSIGHTS

Half of the S&P 500 Index’s strongest days in the last 20 years occurred during a bear market. Another 34% of the market’s best days took place in the first two months of a bull market—before it was clear a bull market had begun. In other words, the best way to weather a downturn could be to stay invested since it’s difficult to time the market’s recovery.2

·     A bear market doesn’t necessarily indicate an economic recession. There have been 26 bear markets since 1929, but only 15 recessions during that time.3 Bear markets often go hand in hand with a slowing economy, but a declining market doesn’t necessarily mean a recession is looming.

·     Assuming a 50-year investment horizon, you can expect to live through about 14 bear markets, give or take. Although it can be difficult to watch your portfolio dip with the market, it’s important to keep in mind that downturns have always been a temporary part of the process.

·     Bear markets can be painful, but overall, markets are positive a majority of the time. Of the last 92 years of market history, bear markets have comprised only about 20.6 of those years. Put another way, stocks have been on the rise 78% of the time.

Avoiding the market’s downs may mean missing out on the ups as well. 78% of the stock market’s best days have occurred during a bear market or during the first two months of a bull market. If you missed the market’s 10 best days over the past 30 years, your returns would have been cut in half. And missing the best 30 days would have reduced your returns by an astonishing 83%.  To read more visit our web site www.Fid-EDGE.com and check out the INSIGHTS tab.

Jayne W. Di Vincenzo, AIF ®, CEP ®

CEO | Wealth Advisor



SOURCES INCLUDE: Hartford Funds, Corporate Finance Institute, Time Value Millionaire, Kestra Investment Management, FACTSET.

__________________________________________________________________________________

She holds her B.A. in Business with a concentration in Economics from NC State University. Jayne has been privileged to attend executive education forums at business schools including Notre Dame's Mendoza College of Business, UCLA's Anderson School of Business and University of Pennsylvania's Wharton School of Business and obtained the Certificate in Financial Planning from ODU. Jayne continues to grow her knowledge with continuing education annually and additional financial planning course work.

Additionally over the last 24 years Jayne earned and maintains her Series 24 General Principal, Series 53 Municipal Principal, Series 7 General Securities, 31 Managed Futures, 65, 63 State Securities, Life, Health, and Long Term Care Insurance Licenses.

Jayne is proud to be a Fiduciary Advisor and provide advice in the best interests of her clients and transparent, fee-based pricing.

Request Your complimentary copy of our

2023 KEY FINANCIAL DATA CHART

Packed with important tax information on tax brackets, deductions, gift tax limits, retirement account contribution limits and more.

Request at: Team@Fid-EDGE.com

Trends in Charitable Giving

According to the most recent report by Giving USA, Americans gave a record breaking $471 billion to charity in 2020.1

Americans usually give to charity for two main reasons: to support a cause or organization they care about, or to leave a legacy through their support.

When giving to charitable organizations, some people elect to support through cash donations. Others, however, understand that supporting an organization may generate tax benefits. They may opt to follow techniques that can maximize both the gift and the potential tax benefit.

Here’s a quick review of a few charitable choices:

Direct gifts are just that: contributions made directly to charitable organizations. Direct gifts may be deductible from income taxes, depending on your individual situation.

Charitable gift annuities are not related to annuities offered by insurance companies. Under this arrangement, the donor gives money, securities, or real estate, and in return, the charitable organization agrees to pay the donor a fixed income. Upon the death of the donor, the assets pass to the charitable organization. Charitable gift annuities enable donors to receive consistent income and potentially manage their taxes.

Pooled-income funds pool contributions from various donors into a fund, which is invested by the charitable organization. Income from the fund is distributed to the donors, according to their share of the fund. Pooled-income funds can enable donors to receive income, manage their tax burden, and make a future gift to charity.

Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the pooled-income fund can be obtained from your financial professional. Read it carefully before you invest or send money.

Gifts in trust enable donors to contribute to a charity and leave assets to beneficiaries. Generally, these irrevocable trusts take one of two forms. With a charitable remainder trust, the donor or chosen beneficiaries can receive lifetime income from the assets in the trust, which is then passed to the charity when the donor dies; in the case of a charitable lead trust, the charity receives the income from the assets in the trust, which passes to the donor’s beneficiaries when the donor dies.

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with these rules and regulations.

Donor-advised funds are funds administered by a charity that a donor can make irrevocable contributions to. This gift may have tax considerations, which is another benefit. The donor also can recommend that the fund make distributions to qualified charitable organizations.

Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the donor-advised fund can be obtained from your financial professional. Read it carefully before you invest or send money.

Some people are comfortable with their current gifting strategies. Others may want a more advanced strategy, however, which can maximize their gift and generate potential tax benefits. A financial professional can help you assess which approach may work best for you.

Remember, the information in this article is not intended as tax or legal advice. And 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.

1. WashingtonPost.com, June 15, 2021

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 2022 FMG Suite.

Let us Help You set up Your Own Charitable Foundation and Give Yourself a Tax Break - It's Inexpensive & Easy!

Not only can supporting causes you care about leave you feeling proud, a part of something larger than yourself and making an important impact on things you may value -- vulnerable populations, animals, the environment or to honor people, organizations or institutions that have been important to you - you can get a deduction for setting up and contributing to your own foundation.



We have a turn-key program that establishes your documents and foundation at very little cost! Reach out for our information package and a guide to the tax breaks.

Will Power

Only one-third of adults have a will in place, which may not be entirely surprising. No one wants to be reminded of their own mortality or spend too much time thinking about what might happen once they’re gone.1

But a will is an instrument of power. Creating one gives you control over the distribution of your assets. If you die without one, the state decides what becomes of your property without regard to your priorities.

A will is a legal document by which an individual or a couple (known as “testator”) identifies their wishes regarding the distribution of their assets after death. A will can typically be broken down into four main parts.

1. Executors - Most wills begin by naming an executor. Executors are responsible for carrying out the wishes outlined in a will. This involves assessing the value of the estate, gathering the assets, paying inheritance tax and other debts (if necessary), and distributing assets among beneficiaries. It’s recommended that you name at least two executors, in case your first choice is unable to fulfill the obligation.

2. Guardians - A will allows you to designate a guardian for your minor children. Whomever you appoint, you will want to make sure beforehand that the individual is able and willing to assume the responsibility. For many people, this is the most important part of a will since, if you die without naming a guardian, the court will decide who takes care of your children.

3. Gifts - This section enables you to identify people or organizations to whom you wish to give gifts of money or specific possessions, such as jewelry or a car. You can also specify conditional gifts, such as a sum of money to a young daughter, but only when she reaches a certain age.

4. Estate - Your estate encompasses everything you own, including real property, financial investments, cash, and personal possessions. Once you have identified specific gifts you would like to distribute, you can apportion the rest of your estate in equal shares among your heirs, or you can split it into percentages. For example, you may decide to give 45 percent each to two children and the remaining 10 percent to a sibling.

The law does not require that a will be drawn up by a professional, and some people choose to create their own wills at home. But where wills are concerned, there is little room for error. You will not be around when the will is read to correct technical errors or clear up confusion. When you draft a will, consider enlisting the help of a legal or financial professional, especially if you have a large estate or complex family situation.

Preparing for the eventual distribution of your assets may not sound enticing. But remember, a will puts the power in your hands. You have worked hard to create a legacy for your loved ones. You deserve to decide what becomes of it.

1. Caring.com, 2021

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 2022 FMG Suite.

Early Distributions from your ROTH IRAs –

Not every situation is the same



Here are some helpful things to know about taking distributions from your ROTH IRA account that may help you minimize taxes and avoid a tax penalty of 10%:

1. It’s 6 months past my 59th birthday – can I start taking distributions or will I have to wait until I am older?

At age 59 ½ you can begin taking distributions from your ROTH IRA tax-free (as long as you have held the account for longer than five years).1 A pretty good half-birthday present, huh?

2. What if the IRA owner passed away and I am the beneficiary receiving distributions? Will I have to pay this tax since I am not 59 ½?

The IRS reports no, you will not be subject to the 10% tax if you receive the account as a beneficiary. This is one of the exceptions to the 10% additional tax rule for distributions from IRAs.2

3. I became disabled this year and had to take distributions from my IRA accounts, but I am only 55. I am assuming I’ll have to pay the 10% tax on top of my income tax for these distributions and am worried.

Not to worry, if you become disabled you will not have to pay a tax penalty on the money you take out from your IRA, no matter your age. 3

4. I’m 30 and am ready to buy my first house! I want to make my down payment larger, though, and know I have funds in my IRA. Can I distribute funds from my IRA without getting penalized in taxes?

Yes! You can take out up to $10,000 from your IRA to fund your first home purchase. $10,000 is the maximum, however.3

5. What if I rolled over my IRA to another IRA this year? Am I subject to a tax penalty?

The IRS’s answer is no, you do not have to pay the 10% tax penalty. This is considered a qualified distribution if you roll over an IRA to an IRA. Same to same. Rollovers are limited to one per year per account. 3

Keep in mind that for any of these situations with ROTH IRAs, to avoid the tax penalty you must have held the account for 5 years.4

1. https://www.irs.gov/publications/p590b#en_US_2021_publink100090244

2. https://www.irs.gov/retirement-plans/roth-iras

3. https://www.irs.gov/taxtopics/tc557

4. https://www.irs.gov/publications/p590b

The Most Valuable Gift I've Ever Received was $8.99

Caroline Chappell, Marketing and Communications Specialist

Two years ago, I was gifted an old record player from a thrift store. With that record player, I was also given a vintage Stevie Wonder LP. I was told the entire gift cost $8.99. I at first wondered how I had received the short end of the stick in terms of Christmas gifts, however, as soon as I turned the record player on and heard the authentic crackle and the unmatched euphonious sound of Stevie Wonder on vinyl, I knew there was no going back.

Two years later, my favorite hobby and a large part of my identity is collecting vintage LPs. It's like finding easter eggs everywhere I go. Being a record-collector gives me an interesting fact to tell about myself to new friends and an activity to share with those I love. And, it allows me to touch a hobby that was popular generations before my own.

This holiday season, Americans plan to spend about $930 on gifting, according to a recent Gallup poll by Lydia Saad. In fact, 37% of the respondents to the poll are planning to spend over $1,000 on gifts. 1 What is your budget this year? What is on your list? With the impact of my record player and my record collecting hobby, I can't help but think, what gifts can we give that aren't monetarily expensive, but instead are just as valuable to us, if not more, than the amount we pay for them?

We may be able to take notes from the Millennial generation. Eventbrite's study on Millennials in the marketplace tells that 3 out of 4 millennials would rather spend money on experiences and events than on items2 -- what if we incorporated this into our gifting strategies this year? To me, my record player and hobby are an experience. What can you give this year that will create an experience for those you love?

Below I have created a brainstormed gifts that may not be expensive, but might instead be valuable to you and those you love. Maybe these will allow you to brainstorm further about what would fit your family best.

Good Old Arts and Crafts, and Hobbies too -- you can't go wrong! Whether it is with construction paper, watercolor, clay, popsicle sticks, or lessons with grandpa on how to fish, it will create a memory.

For example, a trend this year seen on apps like Tik Tok and Instagram is the creation of ornaments out of the simple (and often in-expensive) ingredients of salt, water, and flour. Have a new baby or grandchild in the family? Making an imprint of their hand or foot in the ornament would be a gift to make for family members to commemorate the year of their birth. The same could be done with a new pet, newlyweds and their fingerprints, etc. And, not to mention the bonding experience from making these ornaments that you can keep for a lifetime.

But, we know crafts don't stop here. Do you have a skill like sewing or knitting? Woodworking or drawing? Canoeing or hunting? Who can you share that with and what can you create? It is also possible to utilize the talents we have this holiday season to illuminate how important intangible gifts can be. Maybe you'll even start a family tradition of passing down these lessons at the holidays year after year.

Impromptu Family Photoshoot -- for the years to come! Family photos do not have to be fancy all of the time. I'm not sure about you, but some of my favorite family photos have been the ones taken on a cell phone or old Polaroid camera with less than perfect lighting and with funny faces.

"Today only happens once in a lifetime, so make the most of it." - Michael Ray

It's the moment while taking photos that counts to me. Maybe for you it is the same. So, in your happiest and funniest moments this holiday season, remember to take photos. The experience will make the gift itself. Print the photo, put it in a recycled frame, or even a frame from Walmart, wrap it up and gift it. It will be the perfect addition to your loved one's desk or dresser. And, it will give them a smile every single day.

In the vintage record player spirit, go on a vintage thrifting adventure. Have an idea for a gift in mind? It might just be at your local Goodwill. Take your family members or friends with you and make it an experience! Don't have an idea for a gift to look for? Make a scavenger hunt and think of random items that you might or might not find in a thrift store. Whoever finds the most wins. In Savannah, we have a store called Picker Joes that has the most interesting vintage items in my opinion. Maybe you have a store near you with a similar style. With a quick wash or shine, many items can feel brand new.

Write a note and tell them you appreciate them. One skill that I have learned from CEO, Jayne Di Vincenzo is that handwritten notes never go out of style. People value feeling thought of and people value knowing how you feel about them. I've learned in my six months of working with Jayne that it's never too expensive to have grace and to tell those you love how much you truly love them. So, if you have no idea what to get them, maybe just telling them how you feel with a snowy card will do the trick.

This holiday season, I wish you all the joy and warmth. And remember, an $8.99 gift isn't always the short end of the stick.

Best holiday wishes,

Caroline Chappell

1: https://news.gallup.com/poll/403985/americans-planning-spend-generously-holiday-season.aspx

2: https://www.eventbrite.com/blog/academy/millennials-fueling-experience-economy/#:~:text=the%20Experience%20Economy-,Millennials%3A%20Fueling%20the%20Experience%20Economy,trillion%20in%20annual%20consumer%20spending.

Happy Holidays from Fiduciary EDGE Advisors!

Fiduciary EDGE Advisors, LLC is not affiliated with Kestra Financial. The opinions expressed in this commentary are those of the authors and may not necessarily reflect those held by Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Investment Services, LLC, Bluespring Wealth Partners, LLC, and Grove Point Financial, LLC. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by any entity for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Investment Services, LLC, Bluespring Wealth Partners, LLC, and Grove Point Financial, LLC. Does not offer tax or legal advice.