Conway Wealth Group at Summit Financial Resources Inc.
Michael Conway is founder and CEO of Conway Wealth Group LLC at Summit Financial Resources Inc., a premier, independent financial planning and advisory group. He is a Principal of Summit Financial Resources and serves on the company’s Board of Directors.
As a successful and well-respected financial advisor, Michael has spent more than 30 years building his own practice and providing clients with specialized solutions that blend financial and estate planning strategies with open architecture investment management.
Michael’s clients include successful entrepreneurs, corner office executives, CEOs, CFOs, Wall Street professionals, professional athletes, and others—all with significant wealth tied to their businesses or employers. Michael is creator of The Conway Integrated Wealth Solution™, a unique financial planning process that aligns families' wealth with aspirations and financial goals.
Michael is a member of the Financial Planning Association, and has earned Certified Financial Planner® and Chartered Financial Consultant® credentials. In addition, Michael is frequently looked to as an expert in financial news media, and has been featured in various publications, including Barron's, the Wall Street Journal, Investment News, and Investor's Business Daily, among others.
Michael has three children and lives in New Jersey with his wife, Leslie, and two dogs. He enjoys church, backpacking, scuba diving, and horseback riding.
The American College (ChFC)
The College for Financial Planning (CFP)
CONWAY WEALTH GROUP, LLC is owned by Michael W. Conway who offers securities and investment advisory services through Summit Equities, Inc., Member FINRA/SIPC, and financial planning services through Summit Equities Inc.’s affiliate Summit Financial Resources, Inc. 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax 973-285-3666 Direct Office Tel. 973-285-3640
Wealth Protection & Financial Planning for High Net Worth Families | Michael Conway Story
You’re suggesting that equity prices should not fluctuate based on free markets, but based on the fundamental performance of a company. Our entire economy, along with stock valuation, operates within the core concept of free markets and a society based on capitalism. This means that the forces of supply and demand determine price. Butter at the grocery store is not priced directly because of the quality of the butter. It’s priced based on the amount of people (demand) wanting to buy the butter. The quality of the butter influences that demand, but it does not directly determine price. The same is true in equity markets. A company’s financial quality (based on a fundamental analysis of the balance sheet and cash flow) will influence demand, but it’s the actual demand (or lack thereof) of shares that will directly affect daily prices.
It’s also important to understand how the concept of speculation plays a role in equity market prices. Buyers of stock certainly care about the financial fundamentals of a firm, but they might care even more about whether or not they anticipate the price of the stock to increase in the future. This expectation could be based on many factors, including firm innovation, anticipated sales growth, acquisitions, etc. As buyers enter the market because of these expectations, demand has increased, driving up the price of the shares. There are many, many other factors that could influence the decision making of buyers and sellers in all markets within the structure of our economy, each ultimately playing a role in prices. Our economy is simply not a system in which prices are solely fixed based on fundamental/mathematical factors. It’s also important to understand that the system isn’t without its flaws. Various forms of price manipulation—either illegal or legal—can affect the “freeness” of the market. However, creating a new system of prices based on a strict mathematical equation, whether via the generally accepted accounting principles or otherwise, would be nearly impossible to regulate and might not serve the needs of investors. The complexity of equity market prices is a key reason why investing is extremely difficult for any “do-it-yourself” investors, particularly investors unable to construct diversified portfolios that properly fit their needs.
There are various ways to gain exposure to different corners of the market. Determining an investment type (i.e. stocks, bonds, ETFs, mutual funds, etc.) and segment of the market greatly depends on what you are trying to accomplish and when. For example, traders or “stock pickers” look for trends in the market to exploit. Such a trader might look to invest in energy stocks, which have recently taken a hit as a result of low energy prices. However, there can be significant risks to market timing and stock-picking, especially for “do-it-yourself” investors that don’t have enough access to important information, the expertise to make timed investment decisions, or the restraint to avoid reactionary, emotional trades.
Instead, we generally suggest investors create balanced, diversified, and long-term portfolios. You’ve listed several sectors for stocks. Creating a portfolio that includes some of each will help you build diversification, but consider adding other sectors like financial services, real estate, technology, health care, and utilities. Instead of trying to select individual stocks, you can more easily create diversification using mutual funds or ETFs, which have various holdings within one investment and tend to present generally less inherent risk than individual stock or bond positions. Keep in mind, the first layer of diversification is asset type. You asked about stocks, but building diversification requires exposure to fixed income (bonds) and other assets. The exact blend needs to reflect your needs, time horizon, risk tolerance, and other factors. You then need to think about gaining exposure to different regions. If you want exposure to energy equity, for example, understand that there are energy companies all over the world.
You asked when you should take profit from the portfolio. The short answer: not until you need to. In other words, we suggest reinvesting any gains in your portfolio so that the value of the portfolio continues to grow over time. If you pull funds from the portfolio, you can cut into the principal, which erodes your total growth potential. The portfolio may experience shorter-term highs and lows, and certain parts of the portfolio will outperform others. But a long-term “buy and hold” strategy has historically proven a very effective strategy to build wealth. This doesn’t mean you should never touch an allocation. Broader trends in the market will make it necessary to tweak your exposure.
Before making any decisions, we strongly suggest you speak with a financial advisor.
You’re describing market timing. We’ve all heard the common refrain of buying low and selling high. It’s easy, right? Sadly, like most conventional wisdom, that strategy overlooks important nuance. To win the timing game, investors need to guess both the right time to get in and the right time to get out. But here’s the catch, markets are fickle and ultimately unpredictable. Every data point on the planet may suggest a stock will soon fall, but an irrational market may decide otherwise. Worse, the entire market could move in the opposite direction of sentiment. Remember when people said the market would nosedive if the U.S. elected Trump?
To your point, historical averages suggest we are “due” for a recession. However, the market may very well continue upward. Meanwhile, inflation could continue to erode the purchasing power of the cash you leave in the bank. Ask yourself, how much does the market need to drop before you jump in? Is it 5 percent, 10 percent, 20 percent, more? It’s impossible to determine the exact bottom of the market.
At near-record market highs, someone that can’t emotionally withstand a sudden drop in portfolio value may consider a dollar cost averaging approach to entering the market. The downside to this approach is the opportunity cost of not putting all of your dollars to work. But strategy must depend on risk tolerance, liquidity needs, time horizon, etc. Regardless of how and when investors enter the market, we suggest people build diversified portfolios and maintain a long-term mindset. (For more, see: “Coaching Clients Through Financial Planning: How Advisors Add Value By Managing Behavior”)
To be clear: The selections you’ve provided are not stocks, but are indices—or baskets of stocks—that attempt to benchmark certain parts of the overall stock market. The S&P 500 Index contains the stocks of 500 U.S. large-cap companies across various industries. The Nasdaq 100 Index contains 100 of the largest, most actively traded nonfinancial U.S companies listed on Nasdaq. A few major factors set the Nasdaq 100 apart from the S&P 500: The Nasdaq 100 doesn’t include financial companies, is more heavily weighted in technology companies, and has fewer stocks (and therefore less diversification). This generally means there is greater risk investing in the Nasdaq 100 versus the S&P 500.
It’s not totally clear how your company offers these two options. It’s possible that you’re referring to your company’s 401k program, in which you can select a particular allocation for your portfolio to which you and the company contribute. It’s also not clear what exactly the company is offering, since again, the Nasdaq 100 and S&P 500 indices are not actually investment options, but are benchmarks. Certain mutual and exchange-traded funds exist that attempt to mirror the performance of these indices. Let’s assume that your firm is offering two such funds.
It’s impossible to know what choice is best for you without knowing various factors, including, but not limited to, your age, other current investments, financial situation and needs, tax status, investment objectives, investment experience, time horizon, liquidity needs, and risk tolerance. In general, the Nasdaq 100 is riskier than the S&P 500. Determining how much of that risk to take on would reflect all of the factors I just listed. The broader issue is that neither of these options offers diversification beyond equity markets. Though it may make sense to have a blend of these two indices, you don’t have any exposure to other safer assets, particularly debt (bonds), which might mean you should maintain a substantial cash position in your portfolio (particularly if you are older). I recommend speaking with an advisor who can determine your needs, goals, time horizon, etc. to best determine proper allocation.
The most important part of the answer is probably the most obvious, but warrants particular attention: Slow down your credit card spending. One of the most efficient ways to cut into your debt balance is to avoiding increasing it in the first place. The best strategy to cut spending is to first understand and then manage your spending by creating very specific monthly budgets. You’ll quickly begin to notice some totally unnecessary or frivolous outflows, particularly costs set up through autopay, that you can cut out of your budget entirely. By limiting and closely monitoring your spending, you’ll be well on your way to cutting the debt.
Another thing to consider before actually paying the debt is the way in which you use your cards. It’s important to be very smart about where and how frequently you spend on each card. For example, you may choose to spend more on a particular card because it offers the best in rewards points, but chances are that card also has the highest interest rate or yearly fees. You might also consider pausing credit card spending altogether by choosing to pay in cash for a certain period, if possible.
In actually paying down the debt, you more than likely will need to pay significantly more than the minimum payment to quickly cut the debt. The first key is to focus on the card that costs the most in interest per month. While this would typically be the card with the highest rate, it may instead be the card with a lower rate but higher debt balance. Check your monthly statement to see which card is hitting you the hardest, then go after that card first. This doesn’t necessarily mean you should focus on this card until it’s completely paid down. If you pay down a card to the point that another card begins to cost more a month, consider switching your payment focus.
When it comes to deciding what amount to pay down on a monthly basis, that process again comes down to budgeting. Once you have that monthly budget in place, you’ll know exactly what’s left to apply to the debt. In general, the more you can pay down, the better. If you can pay down multiple cards at once, even better. It’s important to try to use incoming funds to pay down the cards, rather than dipping into any savings that you may need in an emergency.
There are other options to consider, including contacting your card institution to at least ask about lower rate options. It may also be possible to transfer balances from a card to another card (at the same institution) with a lower rate. It’s best to speak with a card rep to understand the fine print of what a transfer may cost. There is also the option of a personal loan, which certainly comes with its own risks you’ll need to consider. Before even considering a personal loan, make sure the loan has a significantly lower interest rate than your current credit card debt. Keep in mind that you should only consider a consolidation method if you believe you’re unable to pay off the debt at your current rates and that you actually plan to tackle the debt burden.