“Calling All Cars” is our silly version of a public announcement to any and all investors. Calling All Cars, specifically identifies opportunities for investors to put new money (cash) to work in their investment accounts. Why do we do this? Well because investors have very bad habits that involve buying high and selling low. We’re doing our very best to help all investors, mostly our clients, learn to do the opposite; buy low and sell high. Today, we have our first opportunity to put new money to work since last summer.
Invest 50% of your planned annual savings to investment accounts
First, let me say with high confidence that you will get another opportunity to add the remainder of your planned savings (50%) sometime later in the year. But, when we have an obvious oversold extreme condition in the markets, as we do today, we must act, even with a partial effort. Clearly, buying into the stock market at this point feels terrible. As of this morning, stocks opened down -7%, making it -20% from the highs of three weeks ago. That’s a lot of carnage in a historically short period of time. Our human nature is wired to avoid pain and run away from risk. Physically, we have a fight or flight mechanism that keeps us alive when under attack by Saber tooth tigers and the like.
Today, we fight.
Now, let’s get into the details.
Today is March 9th, the tax deadline for IRA contributions for 2019 is April 15th. So, at this moment in time, you have a very rich opportunity to make a 2019 contribution to your IRAs, saving yourself a bunch of income tax while adding to your accounts at a very rare 20% discount.
Contribution limits and deductibility are variable for each household based on income and age. This is the definitive website for that info.
529 Plan Contributions
If you haven’t made your retirement plan contributions yet for 2019, I can’t think of a better time to do it. Now, you can also make 2020 IRA contribution at any time but you might wait on that until later in the year when we could have another deep discount opportunity to work with (lower?). Personally, I will save my 2020 contribution for later in the year.
529 plans are other passive type accounts that have calendar year funding opportunities. For those who have ready cash and looking for a good entry point, this is the first obvious one of 2020. I will add 50% of the annual contribution limit to my two boys’ 529 accounts today.
529 plan contribution limits are the same as annual gifting limits which is $15,000 per parent per child. I only do $15,000 per child (not $30,000) because we have been saving for their colleges since they were born. Here’s the best site for all issues related to 529 contributions. Get ‘er done!
There are some obvious assumptions I am making in this Calling All Cars announcement
- You have cash ready to invest. Some do, some don’t
- You are eligible to contribute to retirement plans by age and earned income
- You are going to add money to stock oriented investments because that is where the opportunity (discount) exists. There is no discount and very little opportunity left in Treasury bonds, short funds, hedges or anything that has made money in the last three weeks. The only asset class that is not stock but still attractive, might be Gold.
- Your time horizon is longer than 3 years for any money you plan to put to work now. Current investments should be fine and risk managed, but we’re talking about your time horizon for NEW money here. Do not use cash to fund investment accounts that you will need any time in the next three years. I hope I’m making that clear
Clients in Holding Tank
Several of our clients have money sitting in our “Holding Tank” cash proxy portfolio earning 1-2% annually. You will be hearing from us shortly as we now have an opportunity to deploy that account into something more productive. Stay tuned
That’s it for Part I of Calling All Cars. There will be a Part II in 2020 but don’t let that deter you from doing some of the hard work now.
Stay in the drivers’ seat with your investments and call us if you have questions.
President, All Season Financial Advisors, Inc.