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So far Jim Malliard has created 34 blog entries.

Successful Investors Keep Seatbelts Fastened

Successful Investors Keep Seatbelts FastenedLooking back two years, U.S. stocks have risen more than 30 percent. There have been occasional dips along the way, though the rise has been pretty much non-stop. The first week of February 2018 jolted investors back to reality, as stocks fell more than 10 percent in a short period of time. The numbers themselves sounded scary. The Dow Jones Industrial Average fell 1,800 points in a few days; it was easy to forget the drop was from record heights of 26,000. Since then, markets have recovered more than half of that unnerving slide.

Successful Investors Keep Seatbelts Fastened

It’s a challenge to remain calm during a substantial market decline for some investors. Once again, we have witnessed how important it is to block out “The sky is falling!” media warnings. Emotional reactions are likely to be detrimental for investors. The fact is volatility is a normal part of investing. It is always there. It’s interesting to note that we most often see the term “volatility” used when markets fall, and yet markets are “volatile” on the upswing, too, as we have seen for a good stretch of time.

Investors are well-advised to “stay in their seats with seatbelts fastened” when things get bumpy. Intra-year market declines are common, according to academic research by Dimensional Fund Advisors (DFA). Looking back to 1979, DFA found that about half the years experienced declines at some point of more than 10 percent. Despite those significant drops, calendar year returns finished positive 32 of 37 years.

The DFA study also determined that trying to avoid short-term losses through market timing is apt to hinder long-term performance. A substantial piece of long-term stock returns comes from just a handful of up days. An investor attempting to time the market is all too likely to be on the sidelines on strongly positive days. Through the period of 1990 to 2017, missing out on only the five best days cut returns by a full one-third.

As the markets jump and jolt, try to remain seated and relaxed. Better yet, get up and do something you enjoy. Go for a walk or out to a movie, and let the markets do what they will from day to day knowing that you have a long-term plan.

By |2019-08-14T13:59:49-07:00April 16th, 2018|Current Affairs, Investing|

Retirement Age Rising

Legendary singer Tony Bennett, who at age 91 still tours and performs for live audiences, has quipped, “It’s too late to retire.” More and more, Americans seem to share Bennett’s sentiment; they are postponing retirement and spending their golden years on the job. Recent studies show the average retirement age rising.

Retirement Age Rising

For men, it is just shy of 65 years, up from 62 in 1985. For women, since 1985, average retirement age has increased from about 60 years to 62. Today, about 20 percent of people 65 or older work at least part-time – the highest rate in 55 years. Among 70- to 74-year-olds, 19 percent work – that’s an 11 percent gain since 1994. The Bureau of Labor Statistics predicts if current trends continue, by 2024 about 36 percent of 65- to 69-year-old American workers will still be in the labor force.

While some older workers who delay retirement do so because they need the money, others continue working because they remain healthy, highly-skilled and happy at their jobs. A recent study by Transamerica found that 44 percent of later-retirees continue to work by choice. In other words, many people are working longer not because they have to, but because they want to.

“By the time you’re in your 60s and 70s, you’ve probably worked yourself into something you enjoy doing,” explains Jacquelyn James, an expert on aging at Boston College.

In addition to improved health and longevity, factors contributing to later retirement include:

  • changes to social security have improved incentives to keep working;
  • fewer workers are covered by traditional pensions;
  • people with more education tend to work longer; and
  • many jobs today are less physically demanding than in the past.

Older workers also tend to thrive in knowledge-based jobs – such as finance, law or business – according to Stanford psychologist Laura Carstensen.

By |2019-08-14T13:59:51-07:00October 23rd, 2017|Current Affairs, Retirement|

Bonds Play Key Diversification Role

Jim Mailliard, CFPSo far in 2017, the U.S. economy has been showing signs of stronger economic growth ahead.

Since the presidential election, the bond market has flashed a signal of the expectation of stronger growth, higher future inflation and, thus, higher interest rates. Interest rates have soared with the yield on the 10-year U.S. Treasury bond going from 1.4 percent in June to around 2.3 percent now. Rates are still low by historical standards and will continue to bounce around; but it wouldn’t be a big surprise if the trend continues upward for a while.

Interest rates and bond values move in opposite directions; when one rises the other falls. When bond values fall, investors often wonder if they should hold on to their bond funds. The answer in most cases is yes. Discipline, patience and a willingness to diversify for the long-run are keys to investment success.

Bonds Play Key Diversification Role

Sometimes bonds get a bad rap, but they can play a key diversification role. Bonds historically have been a lot less volatile than stocks. In addition, bonds often move in the opposite direction as stocks. As a result, bonds have a calming effect on portfolio swings. Diversification does not eliminate risk, though bonds mitigate the bad times.

To put it another way, Marketwatch columnist Paul Merriman likens a portfolio to a car: Stocks are the engine, and bonds are the brakes.

Further, studies have shown that rising rates benefit investors over the long-term. Though higher rates temporarily weigh on bond prices, portfolios eventually benefit from the ability to reinvest at higher rates.

Bond funds hold perhaps hundreds of bonds, with bonds maturing pretty much all the time. Fund managers then put the cash into new bonds that pay higher yields. The income distributed to the investor eventually rises, and the investor can reinvest at higher rates – a rewarding strategy over time.

By |2019-08-14T13:59:54-07:00May 8th, 2017|Current Affairs, Investing|

Politics and Your Portfolio

Mailiard address politics and your portfolioWhat is the relationship between politics and your portfolio? This year, investors have lived through not one, but two political earthquakes. In June, pundits and markets were shocked (temporarily at least) by Great Britain’s vote to leave the European Union, referred to as “Brexit.” More recently here at home, in what many would describe as an even bigger shocker, Donald Trump was elected the 45th U.S. president.

In both cases, markets briefly dropped and swiftly bounced back. In the U.S. election, the fall came in overnight trading, with Dow futures falling almost 900 points as state-by-state results came in across the country. By the next day, however, those losses were quickly erased and flipped to solid gains.

Such political and financial tremors can pack an emotional jolt. Yet, they also present a great opportunity for us to focus on some important investing lessons and reminders.

For starters – easy to say but intensely challenging to live out – ignore the media pundits, financial and otherwise, who are almost always wrong, but never pay the price. As Daniel Goldie and Gordon Murray point out in their classic succinct book The Investment Answer, news outlets such as CNBC, Bloomberg or Fox Business pushing “market panic” themes “try to turn investing into entertainment.”

Another, perhaps surprising, lesson is that presidential elections do not impact the markets in the long term. Studies by Dimensional Fund Advisors (DFA), a highly-academic, research-oriented firm, indicate data going back to 1926 suggests no “obvious pattern of stock market performance based upon which party holds the Oval Office.” They conclude that investment decisions should not be made based on the outcome of presidential elections. DFA sums it up like this: “Over the long run, the market has provided substantial returns regardless of who controlled the executive branch.” Click here to read the DFA article on presidential elections and the stock market.

Politics and Your Portfolio

“Over the long run, the market has provided substantial returns regardless of who controlled the executive branch.” ~ Dimensional Fund Advisors

Now is a good time to review the keys to a better investment experience. Start with a plan that includes smart diversification. A globally-diversified portfolio, based on one’s long-term financial security needs and risk tolerance, reduces undue risk.

Avoid market timing and emotion-based, reactive investing. Stay the course and let markets work for you. Time in the markets, not market timing, rewards investors.

By |2019-08-14T13:59:56-07:00November 20th, 2016|Current Affairs, Investing|

The Brexit Debate

Mailiard-v1-WEBWill the outcome impact your portfolio?

The British referendum on whether to stay in or leave the European Union (EU) has been called the most important vote in Europe in more than 50 years. The EU is an economic and political organization of 28 mostly European member states. Britain’s potential exit from the group (dubbed “Brexit” by the media) has been fiercely debated.

Those in favor of the exit believe the EU impinges on British national sovereignty and stifles the UK economy with excessive regulation and other costs of billions of pounds per year. Those opposed to the exit argue the alliance makes trade, finance and other business activity easier among EU nations.

The EU accounts for 25 percent of global gross domestic product (GDP) and is the UK’s largest trading partner. Brexit opponents say trade barriers are likely to rise after exit. As a result, as economics writer Robert Samuleson bluntly puts it, “Leaving the EU would be an act of national insanity.”

Not surprisingly, the pro-exit side believes strongly the opposite is true. Patrick Minford, former economics advisor to British Prime Minister Margaret Thatcher, asserts leaving the EU would be “entirely positive,” as “Britain would no longer have to put up with millions of costly and often idiotic regulations.”

So, another potential “crisis” grabs headlines, as they always have and always will. What’s an investor to do? As Perspective clients know, the answer is to follow a written, disciplined plan aligned with one’s needs and tolerance for risk. With more than half the world-equities markets outside the United States, despite the cycle of international uncertainty, that plan will almost always call for a broadly and indeed globally diversified portfolio.

By |2019-08-14T13:59:57-07:00June 27th, 2016|Current Affairs, Investing|