The S&P 500 was up 10.78% for the quarter despite the 11.25% sell-off in April. The S&P 500 achieved an all-time high by the end of the second quarter with a year-to-date performance of 6.54%. The aggregate bond index was up 1.28%. The aggregate bond index is used for comparison in the low-risk portion of the portfolio. Equity markets performed well despite the continued uncertainty surrounding the new policies and tariffs being proposed by the current administration. SFG portfolios were positioned to take advantage of this recent advance. Our portfolios are composed of three asset classes: Equities, Traditional Bonds and Alternative Investments. Equities include stocks and the growth portion of the portfolio. Traditional Bonds offer lower risk with lower returns. Alternative Investments are less traditional investments with a low correlation with stocks and bonds; however, they can offer improved risk return characteristics.
Since December of 2024, our investment management has taken advantage of the evolution of alternative investment opportunities. Traditional portfolios are composed of only stocks and bonds. Alternative investments are incorporated into a portfolio to reduce risk and/or improve returns. A good analogy is that these investments are the third leg of a stool, complementing more traditional stocks and bonds and creating balance. Alternative investments have been added into both the risk and low risk portion of the portfolio; however, their largest intended advantage is in the low-risk portion of the portfolio as they provide diversification and the potential for better returns relative to traditional bond portfolios.
Traditional equity portfolios are typically composed of large cap, small cap, international, value or growth investments. All these sub-asset classes rise and fall with the tide of equity markets. Our equity portfolio is concentrated on opportunities focused on large capitalization US companies with a bias towards technology. The equity portfolio has little direct exposure to international, emerging and small cap markets. The rational for focusing on large cap US companies is that the total market cap of all US companies is $56 trillion, which represents about 60% to 65% of all investable global equity markets. For perspective, all of Europe has a market cap of $17 trillion, China has a market cap of $12 trillion, and Japan has a market cap of $6.4 trillion for a total of $35.4 trillion. What is more amazing is the US population is about 350 million versus the combined population of Europe, China and Japan of 2.28 billion. US large cap companies are dominate players in all sectors and have broad international exposure. The performance of portfolios has performed well compared to benchmark portfolios. The strategy is performing as envisioned, and we will continue to monitor/manage the portfolios to reflect the current environment.
As always, we encourage you to regularly meet with your advisor so that they can be up to date on your current situation, have individualized investment reviews, answer questions and make changes where necessary. During these investment reviews, clients commonly ask many of the following questions, so we would like to take this opportunity to address some of these with you.
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- Are you an RIA, and if so, what is the difference between an RIA and Broker Dealer?
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- Are you a fiduciary?
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- How do your fees work?
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- How do I plan for retirement using investing & various savings tools?
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- How can you help me plan for retirement?
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- Are your advisors CERTIFIED FINANCIAL PLANNER ™ professionals?
There are major distinctions between RIAs and Broker Dealers. Broker Dealers are not held to the same fiduciary standards as RIAs. Rather, traditionally they are transaction focused and while financial planning may be offered, it is secondary to the core business of facilitating trades. There can be variations in the business and investment structure of these companies but overall, they are fundamentally different from a Registered Investment Advisor firm. Broker Dealers may have conflicts of interest due to their commission-based compensation structure as they earn commissions on transactions. As an RIA, Socha Financial Group does not receive commissions based on investment selections but is compensated by a management fee based on the assets actively managed. This allows us to make nonbiased investment selections with your best interest in mind.
As a Registered Investment Advisor (RIA), Socha Financial Group, LLC is held to a higher fiduciary standard. This means that we must prioritize our clients’ best interests above all else and act in an ethical manner in business dealings. All our advisors are CFP ® professionals. In service of this duty, we are experienced in a range of services beyond investment management including holistic financial planning, insurance, retirement and tax planning. Our comprehensive approach takes into consideration your personal needs to ensure that our investment strategy and your portfolio(s) are in continual alignment with your individual short- and long-term financial goals as well as your specific tax situation. As your financial life changes, we adjust with you every step of the way.
We hope you enjoy the rest of your summer.
All our best,
The Socha Financial Group Team
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Socha Financial Group, LLC (“SFG”), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Socha. Please remember to contact Socha, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Socha is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the SFG’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your Socha account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Socha accounts; and (3) a description of each comparative benchmark/index is available upon request.
Please Note: Limitations: Neither rankings and/or recognition by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any designation or certification, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Socha is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (see link as to participation data/criteria, to the extent applicable). Unless expressly indicated to the contrary, Socha did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of Socha by any of its clients. ANY QUESTIONS: SFG’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking.