By Ken Hatfield...
It will soon be the 10-year anniversary of when, in early October 2007, the S&P 500 Index hit what was its highest point before losing more than half of its value over the next year and a half during the global financial crisis. What are the lessons for the next crisis? This, another article with the benefit of hindsight, provides a useful perspective for investors. To read the article please click here: Lessons-for-the-Next-Crisis.pdf
Weston, many of you may recall, spoke at our Speakers Forum and Reception two years ago and is well known for his compelling talks and prolific writing. In his piece 'A Look Back at 2016", Wellington says, "Every year brings its share of surprises. But how many of us could have imagined that 2016 would see the Chicago Cubs win the World Series, Bob Dylan receive the Nobel Prize in Literature, Donald Trump elected president, and the Dow Jones Industrial Average close out the year a whisker away from 20,000?"
This short piece is worth the read. Please click the link below to read the full story....
We are often asked by those who may have experienced a personal security breach, or may have been the victim of identity theft, what actions they should take. A good reference piece has been prepared by Charles Schwab, and we felt it useful in answering questions related to the steps to take after having been a victim of such a crime. The piece notes, "Time is of the essence, whether your personal data has been compromised as part of a larger cyberattack, or you are the victim of an individual cybercrime. You'll need to take immediate action to minimize the impacts." The piece provides steps that you should take and how to respond within the first 24-48 hours, as well as valuable suggestions, websites, phone numbers and email addresses to be utilized should you become a victim.
While we at Portfolio Advisors are not experts in this area, some of our staff members have been victims themselves and may be of assistance to you in helping answer questions that you may have....
You've heard us say it many times. It's near impossible to accurately predict which asset class or sector is going to outperform or under perform at any point in time. Therefore, we continue to encourage investors to maintain a broadly diversified portfolio to capture returns among the various areas of the market as they occur.
A recent article from Dimensional Fund Advisors helps underscore the unpredictable nature of returns. Using a recent example, the article notes that small cap stocks led large caps through October 31 by a slim .34% margin (as measured by the Russell 1000 Index 5.82% YTD return vs. Russell 2000 Index 6.16% YTD return). The article goes on to point out that in the eight trading days following the US presidential election, the margin for small cap stocks grew by a considerable margin of 8% (as measured by the Russell 1000 Index 9.99% YTD return vs. Russell 2000 Index 18.00% YTD return)....
Once again, an important lesson has been reaffirmed. Those who try to predict short-term market movements do so at their own peril. The recent presidential election was just one of many such affirmations. If you were glued to your TV the night of the election, you watched reports of the Dow Futures falling over 800 points, and you probably went to bed thinking that the following day would bring even greater declines. You would have been wrong. The market opened having reversed course, and by the end of the day the Dow and the S&P500 were not only positive but closed posting strong gains.
Since the election, we have seen markets continue to advance and to hit new highs. Many wonder if the trend will continue. In the short-run, no one can be certain. What we do know is that this year markets have confounded nearly everyone. The year began with the S&P500 falling 9% during the first six weeks of the year, only to rebound and move sharply to the upside. We then watched a vote in the United Kingdom with an unexpected result. The reaction to “Brexit” resulted in global market declines the morning after with the S&P 500 suffering a 5.4% decline, its largest single day loss since 2011. You know the rest of the story. Within days, the S&P had regained its footing and continued to advance....
Thank you to our clients who completed our Client Survey earlier this summer. Portfolio Advisors has existed for some 26 years, and we’ve learned a lot about our clients over that time. However, we’ve also learned that it’s not always so easy to know how our clients see things. That’s why we ask.
Several helpful pieces of information came from the survey, and we’d like to share some highlights. First, if you’ve had a review meeting with us this year, there’s a good chance that we worked with you on developing a more formal financial plan using our software. Your answers support this effort. When you were asked how you primarily measure the value received from your advisor, 3 of your top 4 answers are served through the planning process: sense of security/peace of mind, knowledge of my personal financial situation, and progress toward my goals. We’ve received positive feedback on our planning process during meetings. Your answers here further support this effort....
When news breaks and markets move, content-starved media often invite talking heads to muse on the repercussions. Knowing the difference between this speculative opinion and actual facts can help investors stay disciplined during purported "crises." Please click below to read the full article.
This year's Speaker Forum and Reception will feature Dimensional Funds Vice President Scott Bosworth presenting his topic, "Implications of Investor Behavior." The Forum will be held on October 11th at 5:30 p.m. in the University Business Center at California State University, Fresno. Please see invitation and speaker bio for further details.
When news breaks and markets move, content-starved media often invite talking heads to muse on the repercussions. Knowing the difference between this speculative opinion and actual facts can help investors stay disciplined during purported "crises." Click below for full article.
How much risk one takes is an important part of the financial planning process. While the degree of risk and associated volatility is highly client specific, being able to stick with the plan throughout both the ups and downs of the market is the key to achieving long term rewards. This video helps reinforce the importance of investors sticking with the plan and also helps illustrate the approach that Portfolio Advisors takes toward investing. Click here for video
"Do you ever listen to the news and find yourself thinking that the world has gone to the dogs? The roll call of depressing headlines seems endless. But look beyond what the media calls news, and there also are a lot of things going right." This article, written by Dimensional Funds Vice President Jim Parker, sheds light on some of the things that are going right.
To read more about this subject, click here: Ten_Reasons_to_be_Cheerful.pdf
This short and compelling article reinforces the premise that "Investors can benefit from consistent exposure to both US and non-US equities." It examines "The Lost Decade," a period in which the S&P 500 recorded a total return of -9.1%. The article goes on to point out that while the S&P 500 was negative for this 10 year period, "conditions were more favorable for global equity investors as most equity asset classes outside the US generated positive returns over the course of the decade." By investing in both US and non-US equities, investors are best positioned to capture global market returns.
Please click this link to access the complete article: Why-Should-You-Diversify.pdf
No doubt about it, the year has gotten off to a rocky start as reflected in the January S&P 500 index return of -4.96%. This, the ninth lowest return for the index since 1926, has investors wondering whether these returns have some predictive power for returns throughout the rest of 2016. In looking back over the past 90 years, we see that a negative January was followed by a subsequent 11 month return that was positive 59% of those years, with an average return of 7%. Further, looking at just the 5 lowest January returns (excluding January, 2016), we see that the following 11 months in those years had an average return of 14%.
While we can't predict how markets will react based on the past, we can say that a negative January does not necessarily predict poor market returns for the rest of the year. Further, returns over any period can be positive or negative. As such, we believe that investors should maintain a disciplined approach through all periods in order to capture returns the market offers....
Yes. While stock market volatility is unsettling, it is also quite normal. We have provided two graphs that help demonstrate stock market volatility. The first graph, "US Market Intra-year Gains and Declines vs. Calendar Year Returns," shows both the "highs" and the "lows" for each year from 1979 through 2014. The black and red bars show the "highs" and "lows" of the market for each year. The blue bar shows the actual return recorded for the year. You will note that the calendar year return is often very different from the "highs" and "lows" that occurred during each year, and it is instructive to note that during this 36 year period, positive returns were achieved 83.3% of the time. For further perspective, you may also view the second graph, "US Large Cap Market Intra-year Gains and Declines vs. Calendar Year Returns." This graph provides even greater perspective as it looks at the largest US stocks for the period of 1926 through 2014. During this 89 year period positive returns were achieved 73.3% of the time. Both graphs provide a visual perspective of just how "normal" yearly market volatility is. They also provide evidence which shows that investors that have remained disciplined have historically been rewarded for staying in their seats during these periods of unsettling volatility.
Click below to view each graph....
Featured speakers include Dimensional Funds Vice President Weston Wellington presenting his topic, "Redefining Investment Advice." Also, Dale de Goede, Attorney at Law, will present his topic, "Top Ten Estate Planning Tips." The Forum will be held on October 6th at 5:30 p.m. in the University Business Center at California State University, Fresno. Please see invitation and speaker bio for further details.
Two recent articles, written by DFA Vice President Jim Parker, are both timely and compelling. The first article, entitled The China Syndrome, highlights the recent severe volatility in China's stock market, raising questions among many investors about the causes of the fall and the wider implications for the global economy and markets. The second article is entitled Greece is the Word. This article highlights how the world's markets and media financial pages have focused intensely on the standoff between debt-laden Greece and its international lenders. Both news stories have been fast-paced and difficult to keep up with. More importantly, the speculation about possible outcomes has been intense. In his articles, Parker offers insight that provides investors with a unique perspective.
While these world events can be both troubling and unpredictable, we believe the best approach remains diversifying across many countries and asset classes, staying focused on your own goals, and most of all, talking to your chosen advisor who understands your situation best.
In case you missed our College Planning webinar presented by Global College Search Associates in April, a recording is now available. This is a new recording as the audio problems experienced during the actual presentation have been corrected. Please click below.
At Portfolio Advisors, our approach to investing focuses on controlling the things which are actually within our ability to do so. This differs from the conventional approach that relies on market timing, stock picking, and active trading. We believe that the structure of the portfolio is the single most important aspect in determining returns. We also believe that controlling costs, by minimizing trading and using low cost funds, can have a significant positive impact on returns over time. As such, our fund family of choice is Dimensional Fund Advisors. For more than 30 years, Dimensional has been translating compelling research into practical investment solutions. We offer this four minute video that helps explain how Dimensional is different, and how their investment philosophy evolved by drawing upon the academic community.
To view, click on the link below....
Investors, besieged with financial news, reports, and information daily, may be inclined to constantly tinker or make adjustments to their portfolio. By following the advice from a recent article or a talking head, they can be susceptible to the latest fad or market predictions and may get caught up in the excitement of chasing what are all too often allusive returns. In his piece “The Art of Letting Go,” Dimensional Fund Vice President, Jim Parker suggests that investors might be better served by following the Chinese Taoism tenant of “wuwei,” or, “non-doing” than micro managing their portfolio. Find this month's article below.
From time to time we are asked to offer our opinion as to whether or not gold should be a part of one’s portfolio. While interest in gold seems to ebb and flow as economic reports and political events unfold, general interest seems to persist. As such, we thought Dimensional Funds VP Weston Wellington’s recent article exploring the merits of holding gold as an investment is instructive. Throughout the article Weston cites the thoughtful opinions of Warren Buffett. His comment that “where gold advocates see a safe harbor, Buffet sees just a different set of rocks to crash into” offers insight into his question of Who has the Midas Touch? Find this month’s article below.
As we approach mid-year 2013, rampant pessimism as measured by consumer sentiment has recently dipped to its lowest level in over 30 years. This degree of pessimism is so pervasive that some would suggest that “America’s best days are behind her.” As an investor, how worried should you be? Maybe not as worried as so many others seem to be as suggested in this month’s article entitled Investors Flee Stocks At Precisely The Wrong Time. The article points out that historically, consumer sentiment and stock market performance are often at odds. Read more of this month’s insightful article by following the link below.
There is still time to reduce your 2012 tax liability by making an IRA contribution before the filing deadline of April 15, 2013 (but please don’t wait until the last minute). You may be able to contribute up to $5,000 for 2012. If you are over age 50, you may be able to contribute up to $6,000*. If you are married and both over age 50, you could save up to $3,360 combined in Federal Income Tax for 2012 (28% tax bracket) provided that both of you have contributed up to the $6,000 threshold. Not only would your tax burden be reduced by $3,360, your $12,000 combined IRA contributions would continue to grow tax deferred until withdrawal at retirement age.
Another option to consider is a Roth IRA contribution up to the same $5,000 limit. Similarly, those over 50 can contribute up to $6,000**. There is no immediate tax benefit to the Roth IRA as after tax dollars are used to fund this retirement vehicle. However, the benefit is that the Roth IRA is allowed to grow free of Federal and State tax. Unlike the traditional IRA, there is no tax due when you begin to take money out at retirement age***. Because Roth withdrawals at retirement are not taxable, they can provide the additional benefit of tax bracket management. Simply put, money taken from a Roth IRA at retirement might allow one to control in which tax bracket they fall. Roth IRAs can be a consideration for those who will be in the same or higher tax bracket upon retirement....
If you have not already received your 1099 Composite and Year-End Summary for your respective accounts for 2012, it should arrive from Charles Schwab no later than the end of February. Should you have any questions regarding your Portfolio Report or your 1099 statement, please do not hesitate to call us. We also request that once you have completed your 2012 tax return that you provide us with a copy so that we may better advise you.
We just came across a great Financial Planning Flowchart that was published in the December 20 issue of Business Week. It was put together by the Business Week team of Nick Summers and Karen Wise with input from Milo Benningfield, a San Francisco-based financial planner; Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards; Tim Steffen, Director of Financial Planning and Wealth Management at Robert W. Baird; Maria Bruno a senior investment analyst at Vanguard Group and Meir Statman, finance professor at Santa Clara University.
The chart does a nice job of mapping out basic financial planning tenets and touches on debt management, retirement planning and insurance needs. We thought you might find it worthwhile in your planning for 2013 and perhaps even a little fun....
As we enter the new-year, it may be worthwhile to reflect on 2012. Please see the article below written by Weston Wellington, Vice President with Dimensional Fund Advisors, entitled “2012: The Year It Didn’t Happen.” The article reminds us that, as is so often the case, earning the rewards offered by the world’s capital markets requires a combination of discipline and detachment from the ominous headlines that we are bombarded with daily. I hope that you find the article worthwhile.
We at Portfolio Advisors wish you the very best that 2013 can offer, and we remain here to serve you....
In his article, “The Top Ten Money Excuses,” Dimensional Funds Vice President Jim Parker suggests that we often deceive ourselves when it comes to our own money. How can this happen, one might ask? It can happen by constructing a façade of logical-sounding arguments that can often lead to decisions that are counter to our own long-term interests. Read on to learn about those top ten arguments and excuses along with how to avoid them....
From time to time, you may have the need to calculate the cost of a loan, or you may need to calculate the impact of increasing or decreasing contributions to your retirement plan. You may be interested in knowing if it is better to lease or buy a new vehicle. Perhaps you are curious about whether an auto rebate is a preferable choice versus securing a lower interest rate.
A wide variety of on-line tools can be found on our website and can be helpful with these and other common financial questions. In addition to those mentioned, you can also find a 1040 tax calculator, an amortizing loan calculator and a Roth IRA Conversion calculator to name a few. These useful tools can all be found on the Portfolio Advisors website at Online Tools....
Quiz Question: What do these companies have in common—Whitbread of the United Kingdom, Molson Coors of North America, Qantas of Australia, Honda of Japan, and Adidas of Germany?
Dimensional Funds Vice President, Jim Parker, provides the answer in his column “Sharing the Wealth: The Case for Equities”....
Portfolio Advisors, Inc. is proud to announce that Tina Mistry has completed her financial planning training and has passed the CFP® Certification Exam. She has obtained her Certified Financial PlannerTM certification, demonstrating that she has met the standards required by the CFP® Board.
The year 2011 could be remembered for the unsettling volatility seen in the S&P 500 index, a measure of large company US stocks. January offered a promising start with a 2% gain and by April, the S&P was up 8%. Wobbling followed during May and June, and volatility really began in mid-July with the index diving 17% in just 11 days. In August, the index rose or fell 4%+ on 5 of 6 consecutive days.
Happy New Year! We hope you and your family had a wonderful holiday season.
With the New Year comes along new reporting from Schwab for taxable accounts. The purpose of this posting is to address some new IRS tax reporting requirements and to explain how the changes might affect you.
I was listening to a news commentary on PBS last night and the discussion revolved around the state of the economy, 8 to 9% unemployment and the housing and financial mess that we continue to face. All agreed that these are indeed tough times. However, one of the guests reminded the others that tough times are not new and that over time we have always worked our way through seemingly impossible situations.
When you refer someone to us, we regard it as a sign of trust and a compliment of the highest order. Referrals, after all, are the lifeblood of our business and are the largest source of new business for our firm. As such, you should know that we will do everything we can to meet and exceed the expectations of people you refer to us.
October was quite a month from an S&P 500 standpoint. The index grew 10.9%, its largest growth month since 1991. This growth spurt followed, as you may recall, 5 consecutive months of decline.
We’re certainly seeing big daily, weekly and monthly swings in stock market indices…. turbulent times indeed. But, with stock markets, shouldn’t we expect a degree of turbulence? Since 1980, for example, the average intra-year (that is, during each calendar year) S&P 500 decline exceeded 14%. Restated, the average high-to-low decline during those calendar years exceeded 14%.
Thanks for taking a look at our updated website and blog! We have been hard at work to make the website compelling and relevant. We have also changed the look and functionality of our blog and we invite you to follow us by submitting your email address. When a new item posts, you will receive an email alerting you with a link to the item. We plan to add one or two new topical items per month and hope that you will find them interesting. Some other new blog functions include the ability to easily email an item to a friend, or to post it to your own blog. You will also be able to share the post through your own Twitter and Facebook pages.
A dying man's wish to bring the knowledge of Wall Street to Main Street.
The large budget deficits run by the U.S. government are a big concern to many. What does history tell us of the implications? To economic growth? To stock markets? This study by Marlena Lee sheds light on the topic.
I hear concerns from a lot of people about our current leadership and its impact on the economy and stock performance. A recent presentation by Weston Wellington of DFA addresses this topic head on. Here is a link to the talk: http://www.dfaus.com/library/videos/governme/
Thank you to everyone who attended our recent client education seminar entitled, "The Tenets of Successful Investing." Except for some difficulties with the venue, I'm very pleased with the feedback from attendees overall. The message was pertinent, and attendees indicated that they left with something of value.
To view the letter, please go to the "Client Center" tab and click on "Download Documents."
We moved to our new office at the first of the month. It was a big change considering that we have over 20 years of history in the old office. We’ve gotten pretty settled in now though. We’re really enjoying the new environment and look forward to sharing it with our clients.
Our website "went-live" this morning. We hope that you find it to be another good means of communication. Your feedback is welcome.