Investment Contemplation During Inflation

Although there are no guarantees in life, one thing is certain- the cost of living for Americans continues to escalate daily. Inflation, unemployment and other global factors are causing many financial concerns and confusion.  Timothy Baker, a chartered financial analyst with Metric Financial in Simsbury, Connecticut, offers some tips that will help Connecticut residents stay fiscally fit, while navigating the current economic tide. 

“The #1 question I’m asked by clients and the general public is, ‘what should I do to protect my money during a recession”, said Baker.  “I challenge all investors to ignore the daily ups and downs of the stock markets during these turbulent times since disruptions in the market are quite the norm.  Just as we saw in the dot.com bust of 2000, the 9/11 tragedy, the financial crisis of ’08, and the “Covid crash”,  stocks rebounded after each of these major events and we can expect that history will once again repeat itself.”

Baker reiterates that reacting to current events is a risky business as a person can lose even more money on daily fluctuating stock prices, having to pay taxes on capital gains and high financial advisor fees to process the transaction. It’s also important to note that there is very little correlation between economic activity and stock market returns. The data is very mixed on when and how stocks will react to recessions, which are themselves difficult to define.

“Good investors need to keep saving, have a plan, and let their financial needs drive their investments, not predictions or fears about what financial markets might do tomorrow,” adds Baker.  “In fact, research shows that those who buy and hold for at least a 5-year period have seen a 91% chance of a positive return on investment.”

Baker notes that one of the recent trends seen on the stock market as a result of the current volatile economy is that investors are now trading in their high-priced mutual funds in favor of cheaper Exchange-Traded Funds – or ETFs, which passively track an index, like the S&P 500, as opposed to relying on active fund managers to attempt to beat the market with their particular stock-picks.

Another advantage of ETFs is that they are more liquid since they trade on an exchange and thus, can be bought and sold whenever stocks can, they involve much lower fees for the investor since they are passively managed, and finally, ETFs have a structure that make capital gain distributions rare.  “This means that ETFs are more tax-efficient, which can have a meaningful impact on long term wealth creation for an individual,” adds Baker.

Despite the rising interest rates by the Federal Reserve, Baker encourages people to diversify their portfolio according to their risk tolerance, monitor their investments as they relate to inflation and have a long-term time horizon in which they do not try to “time the market” which could be financially devastating.

Lastly, he stresses the importance of working with a financial advisor that one trusts and who fully discloses their fees. 

“My main mission is to educate people on what you are paying for financial planning services as fees can have a huge impact over time,” concludes Baker.  “The mission of Metric Financial is to offer investors a fairer fee so that they can keep more of their returns, while getting the same or more services. Our primary approach with new clients currently working with an advisor is to show them how reducing fees can significantly improve their financial picture over time.”

Founded in 2018, Metric Financial, LLC is registered as an Investment Adviser with the State of Connecticut.  Led by Chartered Financial Analyst Timothy Baker, the firm provides investment management services, comprehensive financial planning, debt management, estate planning, retirement planning, risk management and tax planning, among others. Baker conducts frequent educational sessions and public seminars on a variety of financial topics of interest to schools, business groups, and associations. For more information, please visit www.metricfin.com or call 860.256.5895.

PHOTO: Chartered Financial Analyst Timothy Baker is the principal owner of Metric Financial, a Connecticut-based investment management and financial planning firm that offers educational sessions and public seminars on creating and preserving wealth for one’s retirement.


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