Last week we got news from the Fed, headed by chair woman Janet Yellen, that they are leaving short term interest rates low until further notice. The vote was super close as many on the board felt that now was as good of time as any to normalize the economy as it relates to borrowing costs. Fears of declining global growth, especially out of China, were the deciding factor to leave rates unchanged. This means that the markets direction is still primarily in the hands of the Fed. When they will raise rates and how it will effect the market, are still unknown which is creating the drastic volatility we are experiencing.
The good news is that there are plenty of bright spots under the surface. Keeping interest rates low means that corporations can continue to borrow money cheaply to invest in their own companies or other companies. This scenario of low rates and falling stock prices has created a lot of merger and acquisition activity. The fact that companies are finding value in acquiring other businesses is a healthy sign. Excluding energy, the S&P 500's latest earnings were in line with historical growth trends. Lower gas prices are hurting oil companies but saving consumers money which could start to reflect in the stock market during the upcoming holiday season. Despite the recent volatility, I encourage you not to lose sleep over short term gyrations in the market and to stick with your long-term strategy of regularly contributing towards your diversified portfolio.
The free money I referring to is your employers matching contribution to your retirement account such as your 401k or SIMPLE IRA. Most companies match their employee's contributions dollar for dollar up to around 3-6% of their salary. Even if you are paying off debt, living pay check to pay check, or lack an emergency fund, it is worth it find a way to contribute to your plan to receive this free money. You should think about it as your company offering you a raise or deciding whether or not to take your tax refund. This is your money for the taking!
Be sure to check your companies vesting schedule. For some 401k plans, you may not be able to receive the company match portion of your account unless you stay with the company for 3-5 years. With a SIMPLE IRA, vesting is not allowed.
Also note that the 401k match does not count towards your $18,000 elective deferral limit for 2015.
Your employer's match is there to help you plan for retirement and it only takes a small percentage of your salary to automatically double your money. Contact your HR person to get enrolled and start receiving this tax-deferred, compounding, free money!
I hope you enjoyed this month's newsletter. Feel free to contact me with any questions and topics of interest for next months newsletter. Thank you.
Justin Burgess Investment Advisor
Copley Investment Management
5025 B Wrightsville Ave
Wilmington, NC 28409
CIM's goal is to provide quality financial advice at an economical cost. Whether investing for retirement or the next generation, you can rest assured that we are paying attention. Our professional credentials, independence, experience, integrity, and transparent business model qualify us to accomplish this goal.