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<ul class="summary-list"><li>Many people who receive an inheritance don't spend it wisely, according to financial planners.</li><li>It's important to come up with a detailed financial plan when you receive an inheritance.</li></ul>Receiving a large amount of money from an <a target="_blank" href="https://www.businessinsider.com/estate-planning-how-to-handle-inheritance-assets-house-401k-ira-2024-10">inheritance</a> can be life-changing — but only if you take the right steps to handle it.It can be difficult to make big financial decisions, especially around an emotionally charged subject. According to financial advisors, many inheritors end up spending the money they receive — usually from a deceased parent or grandparent — in just a few years.Don't worry, though, if you're expecting or recently received an inheritance. You can prevent this situation by avoiding a few simple mistakes, according to Vimala Snow, head of wealth strategy at Cresset Capital, and Dave Jones, director of estate strategy at Bailard.Below are the most common mistakes they see clients make and how to avoid them.<h2 id="b00e9626-47f7-4359-b39e-a059e32d0222">Not having tough conversations early</h2>It's definitely not a comfortable conversation, but discussing estate planning early on will save you a lot of headaches later.Jones recommends starting small by talking about easier topics, such as the location of important documents."Just the location of documents can be a starting conversation. Sometimes parents don't want to talk about the exact plans yet," he said.Asking your parents about their retirement accounts, if they have an estate plan, and what sort of assets they're thinking of passing down are good starting points."Those are just really basic things that can then lead into a larger discussion about the estate plan," Jones added.It's much easier to clarify any confusion surrounding assets when the person passing their assets along is still alive, which is why these conversations are important, according to Snow. Inheritors should make sure they understand the values that parents have regarding money, as well as how certain assets should be managed.<h2 id="14519a89-2828-4b1a-924f-d01da5b20939">Not having a long-term plan</h2>This is a common mistake when it comes to financial planning in general, but it's especially relevant when a large amount of money is on the line, according to Jones."A lot of inheritors will spend the money, and they'll spend it quickly because they may not have had the best financial habits before the inheritance," Jones said.He recommends considering a few basic financial planning questions. Take a look at the type of assets you're inheriting — whether it be brokerage accounts, real estate, or others — and evaluate how these fit into your current financial goals.It depends on your personalized financial needs, but Jones recommends considering the following questions: "Do you need to generate income for yourself? Do you have an emergency fund? Do you have debts that you need to pay off?"Inheritors who establish concrete financial goals will set themselves up for success. "There's a much higher chance that the inheritance will benefit the inheritor for a long time," Jones said.<h2 id="1eee78ff-be04-43de-a777-3edbcdfaf8b3">Expecting to receive assets immediately</h2>When coming up with a financial plan, keep in mind that you won't receive your inheritance immediately, according to Snow.Estate administration can be a long legal process. The larger the estate, the longer the wealth transfer process will take, Snow said. It could take several months, or even years, for asset distribution to be completed.If estate taxes are due, then the tax return will need to be submitted nine months after the date of death, Snow added.The distribution process won't always be smooth. Complications can arise, especially over assets like a house, Jones said. If siblings inherit the family home but can't agree on what to do with the property, it could take a long time to figure out how to pass on the asset in a way that satisfies all the inheritors.<h2 id="a6fd722f-adb9-406d-ab55-78010263bfb4">Not working with an advisor</h2>Don't underestimate how complicated estate planning can be. It's often helpful to use the advice of a professional, especially during an emotionally turbulent time.It might take a team of legal and financial professionals to ensure the best outcome for your inheritance. Financial advisors, tax specialists, and estate planning attorneys can all offer assistance.Experts can help you come up with a long-term strategy for investing an inheritance. In more complicated cases, such as if the person died without a will, you may need to consult a probate lawyer to locate and value the deceased's assets. The laws governing estate taxes can also vary from state to state, so getting an expert opinion can help clarify confusion."Making sure that you're asking lots of questions and relying on your team is a really important part of the process rather than trying to do it yourself because it is pretty complicated," Snow said.

Avoid these 4 mistakes and misconceptions when receiving an inheritance, according to financial planners

<ul class="summary-list"><li>Positioning in financial stocks is light relative to other sectors, Morgan Stanley says.</li><li>They see the group as underappreciated, and cite its exposure to ongoing economic strength.</li></ul>Investors are lingering in defensive trades that don't take advantage of the economy's ongoing strength, Morgan Stanley said, highlighting opportunities in underinvested sectors.The firm — which just last week upgraded cyclical stocks to "overweight" relative to defensives — highlighted the financials group as particularly attractive.Morgan Stanley said net exposure to financials is in the bottom 15th percentile of a historical data series that that goes back to 2010. And as the chart below shows, it's also the most lightly owned of any sector.<div type="image" title="A Morgan Stanley chart showing equity sector exposure." height="1448" width="2366" msid="114226247" hostid="261" sizebytes="104460"></div>But Mike Wilson, the bank's CIO and chief US equity strategist, sees a combination of headwinds that could lift financial stocks. "In our view, this creates opportunity in [the financial] sector that we upgraded to overweight last week given: rebounding capital markets activity, a better loan growth environment in 2025, an acceleration in buybacks post Basel Endgame re-proposal, and attractive relative valuation," he wrote.Bank stocks also have more attractive valuations after de-risking last month after large-cap dealers signaled caution on their operating environment in September. Morgan Stanley noted that this weakness lowered earnings-season expectations for investors, making it easier for major lenders to outperform forecasts.<a target="_blank" href="https://markets.businessinsider.com/stocks/jpm-stock">JPMorgan</a> and <a target="_blank" href="https://markets.businessinsider.com/stocks/wfc-stock">Wells Fargo</a> have jumped since publishing better-than-expected earnings reports last week. Since Friday's open, these banks are up 3.8% and 8.8%, respectively.Despite this, the market's appetite for financials hasn't yet materialized, Wilson found. But this isn't just limited to bank stocks — investors are also passing up on other cyclical sectors, concentrating exposure in defensive and quality names.Utilities, healthcare, and real estate — which are defensive plays — are among four sectors with the highest net exposure.According to Wilson, this shows that investors are still positioning themselves for a soft-growth scenario, which seems less likely given in light of recent macroeconomic trends.Though Morgan Stanley moved to neutral on cyclicals versus defensives late last month, it upgraded cyclicals to overweight last week after September's <a target="_blank" href="https://www.businessinsider.com/september-jobs-report-unemployment-rate-nonfarm-payroll-growth-federal-reserve-2024-10">jobs report surged past Wall Street forecasts</a>."As several key macro data points have come in better than expected (namely the jobs report and the ISM Services Index) following the Fed's 50bp rate cut, cyclicals have begun to show relative strength," Wilson said.At the same time, rates market yields are moving higher, indicating that growth concerns are falling.According to the note, cyclicals such as industrials, financials, and energy move up when yields rise, whereas defensive stocks are negatively correlated to higher rates.

Financial stocks are still being woefully underappreciated by investors, Morgan Stanley says

<ul class="summary-list"><li>For Gen Z, retirement is 40 or 50 years away, but now is the perfect time to start saving.</li><li>Investing early and building healthy financial habits is key to a successful retirement.</li></ul>For <a target="_blank" class="" href="https://www.businessinsider.com/top-topics-financial-planner-says-gen-z-clients-ask-2024-10">Gen Zers</a> just entering the workforce, retirement may seem too far away to be a concern.Or, it may seem difficult and anxiety-inducing, especially as Gen Z juggles student loan debt, high costs of living, and a <a target="_blank" class="" href="https://www.businessinsider.com/jobs-recent-college-grads-hiring-slowdown-unemployment-higher-than-population-2024-9">tough job market</a>. And with a rising national debt, many younger workers are increasingly worried that they won't have access to the same resources that boomers have today, such as Social Security and Medicare.Only 15% of Gen Z put a set percentage of their paycheck into a savings account every month. And, only 20% contribute to a 401(k) or retirement account, according to Bank of America.However, when it comes to saving for retirement, there's no such thing as starting too early. In fact, the biggest advantage Gen Z has is time.Business Insider asked four wealth advisors for their best tips and tricks on how Gen Z can maximize their retirement savings, starting now.<h2 id="aa3e47db-cfea-4dbc-85ba-2482e91ab970">Andrew Crowell, vice chairman of wealth management at D.A. Davidson</h2>For Crowell and other experts, the biggest piece of retirement advice is deceptively simple: start early."With even just a modest allocation to investments, your money has the potential to double every 7 to 10 years," Crowell said. That means for a 20-something Gen Zer just starting their career, their money has the potential to double at least four times.Take advantage of your workplace retirement plan, such as a <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/best-retirement-plans">401(k)</a>, where you can contribute a portion of your salary to an account. Employers often match employee contributions up to a certain percentage, typically between 3% and 6%.When investing for the long term, Crowell recommends putting your money into higher-yielding assets such as stocks to ensure that <a target="_blank" class="" href="https://www.businessinsider.com/higher-long-term-inflation-outlook-investing-strategy-attractive-bonds-stocks-2024-10">inflation</a> doesn't erode your savings. The S&amp;P 500 has posted an annualized return of 13% in the last decade, well above inflation.Basic budgeting strategies, such as keeping housing costs at 30% or lower of your total paycheck, can also create a strong foundation for retirement savings, Crowell said. But don't panic if rent takes up a larger proportion of your take-home pay and prevents you from saving as much as you'd like."Their peak earning potential is in the future somewhere years from now, and they're finding just the cost of living to be very expensive," Crowell said of Gen Zers.No amount of savings is too small. "It's less important how much you save out of your paycheck than it is just to get started. You can always dial it up in the future," Crowell added.<h2 id="82328411-a680-4c49-bc2f-60b12971759b">Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group</h2>There are other ways to save for retirement outside a traditional 401(k), Yoshioka pointed out. Self-employed people can utilize a Simplified Employee Pension (SEP) IRA to save for retirement and enjoy tax-deductible contributions.A <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-roth-ira">Roth IRA</a>, which allows you to contribute after-tax dollars for retirement, is also a great choice, Yoshioka said. Once placed inside a Roth IRA, contributions and earnings grow tax-free and can typically be withdrawn tax-free in retirement.For those who like to pick individual stocks and funds, opening a brokerage account and building your own portfolio is another way to invest your savings. But for those who do trade stocks, Yoshioka flags that there are capital gains taxes levied on the profits of an investment.When it comes to retirement savings, keeping the big picture in mind is critical. There will undoubtedly be boom and bust cycles in the stock market, but stay invested, Yoshioka said. During the Great Financial Crisis, some people pulled their money out of the market to protect their assets and never put it back in."When you don't get back in, you have your cash, but inflation eats away at it, and you miss out on a lot of growth in equity markets," Yoshioka said.For Gen Zers who haven't lived through many economic cycles, it's important not to panic-sell in the short term. Equity markets typically bounce back within a year, which is simply a blip in a retirement portfolio that could span 50 to 60 years.<h2 id="80eb8c54-d39b-43ed-af26-9be03baffb34">Ashley Weeks, wealth strategist at TD Bank</h2>Now, more than ever, a successful retirement depends heavily on personal savings, Weeks said.Historically, retirement income has come from what has been dubbed the "three-legged stool" of Social Security, pensions, and personal savings. But today, Weeks points out that less than 15% of individuals in the private sector will have access to a pension, and the future of Social Security is looking uncertain — meaning that the burden of adequate retirement is increasingly falling on the individual.According to Weeks, <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/target-date-funds">target-date funds</a> can be a helpful tool for saving for retirement. Many company 401(k) plans offer them, and they automatically rebalance their portfolio composition to minimize risk as you approach retirement. A target date fund typically has a higher allocation to riskier assets such as stocks early on and increases its exposure to less volatile fixed income holdings as time goes on.It's important to approach saving for retirement with the right mindset. "Start saving early and treat the retirement contributions just like a monthly living expense," Weeks said.<h2 id="5cb054ca-2549-482b-adb2-655c3ce12c1d">Alanna Morey, private wealth advisor at Ameriprise</h2>Building basic budgeting habits is key to retirement success, in Morey's view.There's no one-size-fits-all way to budget, but one popular strategy that Morey recommends is the 50/30/20 rule — meaning that 50% of after-tax income goes to essential costs, 30% to discretionary spending, and 20% to savings or other financial goals such as retirement or buying a house.But before saving for retirement, Morey suggests first building up a basic savings fund for emergencies by putting money in the bank or a high-yield savings account. Once you have enough money saved to cover a few months of essential living expenses, then it's time to start thinking about contributing to a 401(k) or another retirement plan.Morey also recommends automating payments as much as possible. Credit card payments, rent payments, savings, and 401(k) contributions can all be automated to reduce extra hassle and promote healthy financial habits.And if possible, avoid credit card debt."If I'm paying 20% interest on my credit card, I'm paying 20% more for everything," Morey said. That can rapidly eat into your ability to save. If you do have credit card debt, make sure you know what interest rates you're paying and have a plan to start paying it down."It's hard to change those habits or create them later on, and it's harder to catch up on savings later on as well," Morey said.

Gen Z, here's how to craft the best retirement plan starting now: 4 financial experts share their best tips and tricks  

<ul class="summary-list"><li>Investment firms want to offer private-credit ETFs to ordinary investors, the WSJ reported. </li><li>It would give retail investors access to a $1.7 trillion market. </li></ul>A booming corner of the financial markets that has only been available to institutions might soon be open to everyday investors. <a target="_blank" class="" href="https://www.wsj.com/finance/investing/wall-street-races-to-bring-private-credit-to-the-masses-8a25b624?mod=finance_lead_story">According to The Wall Street Journal,</a> some of the biggest private equity and investment management giants want to offer retail investors access to exchange-traded funds backed by private credit. The term broadly refers to loans made to companies and consumers by nonbank lenders. Historically, fund managers have sold "alternative assets" like private debt to institutional investors at a high cost, generating returns of around 10% in recent years — more than they would have seen from investing in the stock or bond markets.Now, as those institutions slow allocations to private credit, the biggest players in the space want to target a new class of investors. According to the Journal, firms like State Street, Apollo Global Management, and BlackRock are working to roll out private credit ETFs to regular investors. The challenge, though, is building a highly liquid ETF out of illiquid private loans. That hurdle is also what will likely draw the eye of regulators as they ensure the ETFs are appropriate for retail investors. But if these ETFs get approved, they will enable regular investors to tap into a booming market, one that BlackRock expects will more than double to $3.5 trillion by 2028. The race to launch private credit ETFs has heated up in recent months.In May, Capital Group and KKR teamed up to start offering funds investing in both public and private assets—including in private credit—starting next year.Last month, State Street proposed a private debt ETF to the Securities and Exchange Commission. The ETF would blend public debt with private debt on mortgage, corporate, and consumer loans purchased from Apollo Global Management. Anna Paglia, State Street's chief business officer, <a target="_blank" class="" href="https://investors.statestreet.com/investor-news-events/press-releases/news-details/2024/State-Street-Global-Advisors-and-Apollo-Global-Management-Join-Forces-to-Increase-and-Broaden-Investor-Access-to-Private-Markets/default.aspx">said in a statement</a> the ETF would "democratize access to private asset exposures," and make them "more accessible to a wider swathe of investors.""It is our goal to bring these investments to scale and help facilitate the process of making private assets more accessible and liquid over time. We see this as only the beginning of a new wave of innovation as public and private markets increasingly converge," Paglia said. Alternative assets make up a small share—less than 3%—of individual investors' global investments, KKR's head of Global Client Solutions Eric Mogelof, told the <a target="_blank" href="https://www.wsj.com/finance/investing/wall-street-races-to-bring-private-credit-to-the-masses-8a25b624">Wall Street Journal</a>.But he says there is huge potential for that share to grow by over three times. "We anticipate these allocations to rise to 10% or greater in the future," he told the Journal.

Investing giants want to offer retail traders access to a booming sector of financial markets

<ul class="summary-list"><li>Wall Street was upbeat on the latest jobs report, but one financial historian expressed concerns.</li><li>Mark Higgins is sounding the alarm bell for potential runaway inflation reminiscent of the 1970s.</li></ul>Investors rejoiced at the Federal Reserve's 50 basis-point cut and last Friday's expectation-beating <a target="_blank" href="https://www.businessinsider.com/strong-september-jobs-employment-exceed-expectations-soft-landing-inflation-investing-2024-10">jobs report</a>.But Mark Higgins, a financial historian and senior investment advisor at Index Fund Advisors, doesn't see much reason to celebrate.Higgins believes the Fed made a mistake by cutting rates at all, much less by 50bps. The economy hasn't defeated inflation yet, and cutting rates will only make inflation worse, he said."The Fed is making a mistake because the risks of inflation reigniting and the consequences of that are much higher than if it stayed tight too long," Higgins told Business Insider.<h2 id="7369b9d3-e7fe-40ad-a1ff-2d4c4b069315">The inflation battle isn't finished yet</h2>To Higgins, one warning sign that inflationary pressures remain was the September jobs report, which beat expectations and signaled the labor market may not be cooling off as much as the market initially thought. Then there's rising wages. Hourly wages are up 4% year-over-year, and while that may seem like a positive development initially, it could actually be hinting at runaway wage inflation, Higgins said.The Fed's aggressive signaling of a soft landing is also inflationary, Higgins said. The promise of rate cuts lifts consumer confidence and fuels spending. Lower rates are boosting demand for homes, and people will spend more in other places as well because they're paying less on their mortgages, according to Higgins.Unfortunately, inflation is notoriously hard to quash. If the Fed is serious about extinguishing inflation, it needs to implement stringent tightening policies. In Higgins' view, it's better that the Fed overcorrect with quantitative tightening than the other way around."If you let go too early, it springs back up," Higgins said of inflation. "And that's why you have to go too far in the other direction."It's a tough pill to swallow, but this course of action often leads to an economic downturn. "If you don't extinguish inflation decisively, which often requires a recession, it's going to pop back up at a higher level," Higgins said.<h2 id="8c95a939-6d74-4627-9cc6-44d21bad6b02">History repeats itself</h2>Similar scenarios have happened twice before, according to Higgins — once in the 1920s, and again in the late 1960s.In the 1920s, the economy was coming out of World War I and an influenza pandemic. Pent-up demand from the pandemic and the transition back to a peacetime economy sent inflation surging, and the Fed was only able to get inflation under control after raising rates aggressively and causing a recession.In the 1960s, inflation began creeping upward again due to excessive money supply growth, towering deficits, and external supply shocks. This time, the Fed was more concerned about lowering unemployment instead of taming inflation and didn't tighten as stringently, leading to what became known as the Great Inflation of 1965 to 1982. The 1970s were plagued by slow economic growth, rising prices, and soaring unemployment. Supply chain issues contributed further to soaring prices in the energy sector.This period of stagflation ended only when Paul Volcker initiated a strict rate-hiking campaign by raising interest rates to 20%.There are some unsettling similarities between now and back then. During both the 1920s and 1960s, wages didn't keep up with the cost of living, resulting in a surge in strikes. Supply chain issues also amplified the economic downturn. Higgins points to the recent dockworkers strike as a potential indicator of worsening wage inflation.<h2 id="a5be74d8-dff5-4fb5-9938-be5a4f21a313">Battling inflation</h2>Higgins suspects that the Fed will repeat the same mistakes it made in the 1960s by cutting rates too quickly and causing inflation to spike again.And if history proves correct, then the only way to fix runaway inflation is to double down on tighter monetary policy by keeping rates elevated, even if it causes a recession. Expect a slower pace of rate cuts — or even rate hikes — from here on out, Higgins predicts."I think the most likely outcome is that inflation will reignite, and the Fed is going to need to slow down," Higgins said. "And I think there's a conceivable scenario where they're going to have to reverse course."Failing to address surging inflation could hurt the Fed's credibility and hamper its ability to guide markets going forward, in Higgins' perspective.Higgins is keeping a close eye on wage inflation and CPI readings to see if the patterns exhibited in the September jobs report continue."One month is not conclusive, but that's a concerning employment report," Higgins said.

The Fed is repeating the same mistake that caused a decade of slow growth and high inflation in the 70s, according to one financial historian

<ul class="summary-list"><li>Ally Financial shares dropped 19% Tuesday after its CFO warned of weaker financial health among borrowers.</li><li>High inflation and a shaky job market have weighed on Ally customers' ability to repay loans.</li></ul>Shares of <a target="_blank" class="" href="https://markets.businessinsider.com/stocks/ally-stock">Ally Financial</a> plunged as much as 19% on Tuesday after the company's CFO said it is seeing a deterioration in the financial health of its consumers.At a Barclays conference on Tuesday, Ally CFO Russell Hutchinson said high inflation and a worsening employment picture had weakened its customers' ability to pay back its loans."Our borrower is struggling with high inflation and cost of living, and now more recently, a weakening employment picture," Hutchinson said.Those challenges have hindered the ability of Ally Financial's customers to pay back their loans in a timely manner.Ally Financial is one of the largest auto lenders in the country, with tens of billions of dollars in debt on its balance sheet tied to consumer auto loans."On the retail auto side, our credit challenges have intensified over the course of the quarter," Hutchinson said. "In July and August, we saw delinquencies up about 20 basis points versus our expectations."He added: "We're clearly dealing with a cohort of borrowers who have been struggling with cost of living and now are struggling with an employment picture that's worsened."Hutchinson expects Ally's delinquency rates to continue rising in the coming months, "just given the size of this population of struggling borrowers.""And so that's really kind of one of the things that's put us on notice around credit development," Hutchinson added.To soften the blow from the rise in delinquency rates, Hutchinson said he expects the company to move up its reserves to cover any potential credit losses.Overall, Ally Financial's comments are not encouraging for the consumer picture, but Ally Financial is known for catering to borrowers with credit scores in the lower to middle ranges.KBW managing director Sanjay Sakhrani questioned whether Ally's struggles would spread to other banks."Clearly, the guide was disappointing and begs the question if this is ALLY-specific or a canary in the coal mine," <a target="_blank" class="" href="https://www.reuters.com/business/finance/ally-financial-flags-intensifying-credit-challenges-shares-slump-2024-09-10/">Sakhrani said</a> on Tuesday.

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