Where are we headed next year? How will the US stock market do? China? Oil? Interest Rates?
Over the next 60 days, my email will be flooded with hundreds of market outlooks for 2016. Some are pretty technical, or have some sort of sales angle, or they have some odd viewpoint that doesn’t make much sense.
Every once in a while, I find one that is really clear and concise – such as the following outlook by Peter Coy of Bloomberg
He sums it up well: 2016 will be “OK-ish”
With the recent roller-coaster-like activity we’ve seen in the market, I thought this article would be well worth sharing: 7 Ways Your Brain Makes You A Terrible Investor
During these last few weeks and months, we’ve advised most clients to stick with their current strategy and to avoid the thoughts discussed in the article.
I have been around for a while now; decades. I remember when investing was done by stock picking. A stock’s value is mostly the current value of its future cash flow. A good stock picker analyzes the future prospects of the underlying company, buys its stock, and rides the price appreciation as the analysis hopefully unfolds. However, today the Federal Reserve openly states that it targets the level of the stock market as a policy tool to change the “mood” of the economy and thus stimulate economic activity. The plan has been/is to boost asset prices, revive the economy’s animal spirits, which then will start to create jobs. It worked in their mathematical models, but not so much in the real world. The markets are way up, the economy not so much.
Add to this how massive pools of money have developed complicated formulas implemented rocket fast with massive computers jerking markets hundreds of points back and forth with reckless regard. These moves have little to do with underlying value or future cash flows.
How does one cope? One way would to not yield to this at all; to ignore it. Ultimately, all that matters is Fair Value. Fair Value is like gravity. What a company is and will be determines its stock price. This is Fair Value and over the long run, it always wins. So buy quality and only at a good price. Sometimes it involves a great deal of patience. Trade the euphoria of runaway advances for confidence in scary declines as computers run the markets to short run extremes. Go back to traditional stock picking to deal with the future of seemingly crazy markets.
It can be easy to do. Some of the best stock pickers are readily available through tried and true mutual funds.
Over the weekend, Ohanesian / Lecours sponsored a 5k and 10k trail run at Sessions Woods in Burlington. Proceeds from the fundraiser go to help protect Connecticut’s forest and the hundreds of miles of trails that run throughout the state. Interested in learning more about CFPA? Learn more here.
Our very own, Erika LeBaron came in second place in the 10k for her age group and won top spot for “Best Fundraiser”. My wife, Jess was the second female to cross the finish line and won her age group in the 5k! Here are a few pictures from the day.
Our staff at Ohanesian / Lecours is growing. Leia Caponegro recently joined the firm as a Client Service Support specialist. She has a lot of responsibilities and clients will likely hear from her soon (if they haven’t already). Currently, she is assisting clients who are now required to take a Required Minimum Distribution from their IRA. She brings a wealth of experience and we’re happy that she joined our team!
Investor’s Business Daily recently wrote an article entitled “Is The American Dream Dead for Millennials And GenX?”
The article paints a bleak picture for younger generations and backs it up with some supporting research in an effort to make a convincing argument. The premise is this: the recession forced younger generations into lower paying jobs that will affect them for decades and they are forced to take on more debt which will be an added burden for decades to come.
This is a great example of the media trying to scare us. Yes, every generation has its issues and some of today’s younger generations have to deal with the effects of starting their career during the recession. The article doesn’t go into the lessons these generations have learned, such as being more cost conscious. Or how that could benefit them down the road.
A line in the article reads “The Silent Generation, those born from 1925 to 1942, “did the best of all because they lived in the golden era of economic growth”. But in many cases their careers got started shortly after the Great Depression. What’s preventing the struggles of today’s younger generations from fueling them and propelling them to a new level of wealth?
We’re seeing increased innovation and scientific breakthroughs on a daily basis. The world economy is more accessible than ever before, allowing billions of people to connect. The internet is igniting our imagination to think and operate on levels that older generations couldn’t even dream of. Despite what we hear in the news, the world is safer, healthier, and wealthier than ever before.
To me, the American Dream is far from dead. I believe that younger generations will continue to push the boundaries and make the world and their own lives better.
CNBC posted an article online yesterday about how to collect social security. It’s over simplified and generalizes the issues and concepts. The interesting part was the number of comments the article received. Close to 600 comments over the last 36 hours! It was scary to browse through these comments to see all the misinformation that was being spread among the commenters.
If you’re thinking about Social Security, or have questions, talk to us. We can help to think through the issues with you and help you avoid some of the common mistakes folks make.
When working longer is no longer an option, it is time to develop strategies to maximize your remaining resources. A combination of planning, adapting and downsizing may be the best course.
At age 60 or so, life has usually simplified. Children are gone by now and expenses have become more predictable. Since Social Security is still on the horizon, you must find ways to create income from what remains. A realistic draw-down strategy and a workable budget are critical to a comfortable retirement.
If your budget prohibits maintaining your prior lifestyle, expenses must be reduced. Many retirees enjoy creating economical solutions to everyday activities. Senior discounts abound while shopping for auto insurance and other products designed for seniors will lower expenses. Perhaps you could even cut the cord to cable TV.
Downsizing to a smaller, less expensive home is an option. You’ll save on mortgage, taxes, insurance and utility costs. You may also withdraw equity from the sale of your original home.
A reverse mortgage can be an option if you prefer to stay where you are and have substantial equity. You can remain in your home while the bank pays you a monthly payment to own your home after you are gone.
Before Social Security starts and you have little or no taxable income, the early period is a great time to convert 401ks and Traditional IRAs into Roth IRAs. In doing so, you convert all your retirement assets into accounts from which future withdrawals are tax free. This minimizes the tax burden from the conversion.
If your resources allow, delay Social Security as long as possible. Each year you delay beyond 62 increases your benefits substantially. And if you can wait until 70, the benefits increase by 8% each year past the defined retirement. If Social Security benefits are due for both individuals, it may be practical to draw from the lesser account at retirement age and allow the other to grow to the maximum at 70 years of age.
In the current low interest environment, payback on annuities is historically low. However, when interest rates rise, these insurance company-backed policies that you purchase can guarantee a fixed payout for the rest of your lives.
If you’re approaching retirement and concerned that you haven’t saved enough but know that working longer is out of the question, there are a lot of options to consider. Start with looking for ways to reduce your expenses. That will have the greatest affect. Hopefully, a combination of these strategies can make up for the difference.
We’ve all heard not to put all our eggs in one basket when it comes to investing. Most of us would agree that sure, it’s good to have diversification but it seems like this concept of diversification has become misunderstood.
When someone says to me “I don’t want all my eggs in one basket,” they are saying they want to spread their risks out. An investor that invests only in the US stock market is putting all of his eggs in one basket. An investor who invests only in bonds is putting all of her eggs in one basket. They aren’t diversifying their portfolio and as a result are taking on risk.
Some investors make a mistake and think they are diversifying their investments, but in reality the opposite is more likely. Here are a few examples to consider:
As we’ve seen, the myth of diversifying assets can be misleading. It’s important to understand the true implication of diversification. Knowing how to invest properly by getting rid of unintended risks and allocating your retirement portfolio can give investors peace of mind and confidence in this present economy.
