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We Don’t Often Say I Told You So…

As if seamlessly coordinated with our year-end client letter hitting mailboxes, markets are doing just what we anticipated – getting volatile. As many of our readers know, and as all of us at Charter Oak have witnessed over decades of managing your investments, the road to investment success is paved with periods of market volatility. It is a well-worn and familiar path that always includes periods of short-term discomfort, but ultimately leads to the long-term growth and success that you and portfolios desire. 


“[W]e at Charter Oak infer that if there were ever a time to just put our heads down and work our investment and financial plan—ignoring the noise—this is surely it.


Market corrections, defined as a decline of 10% or more from a recent peak, occur on average about once every two years. The S&P 500 experienced approximately 17 corrections between 1980 and 2020 – with six of those corrections resulting in bear markets (where securities fall 20% or more from a recent high) and the other 11 transitioned to bull markets (where prices are rising and expected to rise). While corrections appear to be damaging in the short-term, corrections are actually very positive in that they adjust overvalued asset prices and provide buying opportunities at lower prices.


Charter Oak clients have likely seen trade confirmations in their inboxes this week as we take advantage of such buying opportunities. Rebalancing, the process of realigning the weightings of an investment portfolio, is achieved by buying or selling assets to reach a desired portfolio composition. In periods of stock market corrections, Charter Oak’s advisors quickly take advantage of opportunities to sell bonds and buy stocks in client accounts, at a “discount” to the price we would have paid at year-end. 


Thus, we write with a gentle and hopeful reminder of the optimistic big picture. This week we learned that the U.S. economy grew rapidly in the fourth quarter of 2021, with GDP finishing the year at a 6.9% annual rate – the strongest year of growth in nearly four decades. And unemployment benefit filings fell to 260,000 last week, much lower than around 800,000 applications per week one year ago. 


We at Charter Oak remain committed to the knowledge that the essential challenge to long-term successful investing is temperamental: it is how one reacts, or chooses not to react, to market declines that defines success. These principles will continue to govern the nature of our advice to you as 2022 continues. 


“We don’t have to be smarter than the rest. 

We have to be more disciplined than the rest.” – Warren Buffett


While we’re on the topic of sticking to a disciplined long-term plan, the below are some recent financial planning updates of note. 


  • 2022 Gift Tax Exclusion – an individual can now give up to $16,000, and a married couple can give up to $32,000 without having to fill out a gift tax form when filing their tax return. This is an increase from $15,000 for individuals and $30,000 for married couples in 2021. 


  • Updated IRS Required Minimum Distribution Tables – the IRA released new life expectancy tables for calculating required minimum distributions (RMDs) for 02022. The new tables assume a longer life expectancy, which may have the effect of reducing RMD amounts. 


  • Covid-19 Funeral Assistance through FEMA – the Federal Emergency Management Agency is providing financial assistance for Covid-19 related funeral expenses incurred on or after January 20, 2020. Many families who are eligible for reimbursement have not taken advantage of this benefit, mainly due to lack of awareness. A list of eligible expenses and how to apply for the relief can be found on this FEMA flyer, and a helpful news article on the benefit can be found here.


And finally, Charter Oak is pleased to announce the promotion of Sarah Serling, JD, CFP® to Partner and Senior Financial Advisor, effective January 1, 2022. Click here to read our press release announcing the promotion. 


As always, it is our pleasure and privilege to serve you, and to be a calming and confident voice when seas get rough. We thank you for being our clients and welcome your comments and questions