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Now May Be The Best Time To Check Your Risk Tolerance

Is this the top of the market? If so, are you (and your investments) ready for the possible roller coaster that could follow?

That’s the gist of a recent WSJ article, and it’s not bad advice to consider.

Investor’s appetite for risk is constantly changing.  When the market is bullish (like it is right now) investors want to maximize their returns and are willing to take on more risk.  Yet, as soon as the market turns sour, investors want to limit their risk and move to something “safer”.

That knee-jerk reaction can often end up hurting the investor in the long run. They end up buy and selling at the wrong time.

It’s better to take time now for investors to imagine how they would feel if there was a 5% or 10% drop in the market.  Would they stay calm and stay the course or would they be looking to move to more conservative investments?

If you haven’t thought about that, take some time now to consider what you would do.

Of course, we can help guide you.

The Great Tax Migration

Sick of the high costs to live in Connecticut? Some residents (and our clients, too) are taking action and moving to cheaper states. If you’re curious to see how much you could save, start with these resources:

How Money Walks:Wealth is leaving this state, mostly to Florida, North Carolina, Massachusetts, Virginia and South Caroline. Some wealth is coming into the state from New York, New Jersey, Illinois and Michigan – states that are MORE expensive than Connecticut.

Save Taxes By Moving: Great calculator to help you quantify your state-income savings if you moved to another state.

City to City: How Far Your Paycheck Goes: A simple tool to help compare the cost of living from one city to another. I like this one because it takes into account the median income.

Why Americans Don’t Own As Much Stock As They Used To

At first glance, the trend of stock ownership in the US is quite declining.  It appears that for most Americans, the percentage of stock in a portfolio is less and less.  That’s scary… but there is more to this story than just another post about investors sitting in cash.

How much stick do investors own


What explains the declining ownership of stocks? In part, it’s the following:

  1. It’s a lack of confidence in the market. Fear of another recession or another bear market. That’s not new.
  2. Over the last 10-15 years, there have been a lot more products and asset classes available that simply weren’t available in the 60s, 70s or 80s. There are now more investment options than ever before available to investors.  Stocks and bonds are no longer the only game in town.
  3. Americans (and Europeans, and Japanese) are aging and becoming more conservative with their investments.


Why I Hate Headlines

With headlines like “Stocks hit all time high”, “Breaking Records: Dow and S&P 500”, or “It Looks Like The Economy is About To Roar”, you might expect to see a remarkable chart showing lots of growth.

But not this time.  Far from it.

After a stellar 2013, the US stock market has limped into 2014.  Perhaps the media is grasping at straws in an effort to keep viewers engaged.  Those headlines sure make things look great.  But the charts tell a different story.

Overuse of Backtesting Can Lead to Confusion

I’m glad to see the concern for an over reliance on backtesting investment strategies is starting to make itself known.  Good article here in Barrons.

Here are a few pointers we follow when evaluating new ETFs that have launched:

1)      Look for simplicity. Any strategy that appears to be vague or confusing raises flags for us.

2)      Watch the charts. It’s extremely rare that we would recommend an ETF without a 6-12 month track record. We want to understand some of the risk and volatility factors of the actual ETF and compare that to the backtested results.

3)      Understand the manager.  We dig deep to understand the manager or the shop behind the ETF and look at their track record.

4)      We look elsewhere to confirm our thoughts. Morningstar and can offer a lot of insight on new strategies.