Over 22 Years To Get Your Money Back?

They say to “buy and hold,” but is that really the best approach? I don’t believe it is for many people. Let me explain why…

Below is a fantastic chart from Michael Lebowitz. The chart shows how long it took an investor to regain their purchasing power after major U.S. stock market peaks going back to 1900.

The time-frames to breakeven (net of inflation) have ranged from 14 to 29 years with an average of about 22 years! Think about that for a moment. Twenty-nine years is about as long as most people’s entire retirement!
Continue reading “Over 22 Years To Get Your Money Back?”

Question I Was Asked In Several Quarterly Client Meetings

In my Q1 market review, I mentioned that both U.S. bonds and stocks were down together for the quarter, and that was a relatively rare occurrence. I mentioned that only happened 8 other times in the previous 30 years. This was concerning for a few clients.

The primary reason it was concerning for some clients is that I generally have portfolios positioned more conservatively than I would in a more “neutral” environment. In other words, I have a targeted range to which I am bound for each client and am currently positioned on the conservative end of that range for most clients. The reason for the relatively conservative positioning is that I am concerned about stock market valuations (i.e. stocks are about as, or more, expensive as they were in 1929 and 2000…depending on the metric).

So when both bonds and stocks decline together it makes folks nervous. After all, isn’t the idea that bonds will hold up when stocks are declining? To add insult to injury, bonds actually declined MORE than stocks in the first quarter. As a result, several clients asked me, “Why did that happen?” “Will it continue?” “Is this still the right strategy?” Continue reading “Question I Was Asked In Several Quarterly Client Meetings”

What is “Sequence of Returns Risk” and Why Should You Care?

Yesterday, I wrote about why financial planning is so important. I included an actual case study of how a robust financial plan can help shape your investment strategy to give you a better chance of achieving your financial goals and preserving your financial independence across a variety of market environments. In that commentary I introduced the concept of “Sequence of Returns Risk.”

Sequence of Returns Risk is absolutely critical to understand especially for folks within 5 years of retirement or who have retired within the last 7-10 years. Continue reading “What is “Sequence of Returns Risk” and Why Should You Care?”

The Importance of Financial Planning

This lull in market volatility provides a good opportunity to step back and look at the bigger picture…. the importance of a financial plan.

There are so many important financial decisions and questions that can be shaped and answered by a robust plan. It does far more than simply helping determine if you’ll be able to retire when you want and how you want.

But, today, let me focus on just one interesting example of how a robust plan can help you make better investment decisions and increase your probability of remaining financially independent in a variety of market environments. Continue reading “The Importance of Financial Planning”