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A Perfect Portfolio
The concept of a diversified portfolio was sorely tested in 2008-2009. It seemed that every asset class what hit equally hard. The S&P 500 lost 37%, but an index of intermediate term treasury bonds increased by 19%. Many investors who had positions in bonds lost considerably less than those totally invested in equities. A number of our clients had overall losses of 10% and less.
Better Half Right Than All Wrong
In case you haven’t noticed, the stock market has surged over the past month and a half. A 35% increase in the S&P500 is a great performance for a whole year, let alone six weeks. The big question is “where do we go from here?”.
Keep Your Fingers Crossed
After an awful start to 2008, there has been a strong rally in March and into April. This may indicate better things to come, or it may represent a “bear market rally”.
Independence
One of the most important, and generally overlooked considerations in working with a financial advisor is the answer to the question,"who do you work for?" We have all heard about the huge problems at firms with familiar names, some of whom have actually failed. Let's think about the problems of the firm influence the bahavior of their representatives.
Mutual Strength
In the current recession, fixed annuities have once again come into favor. Not only are the rates on these policies better than certificates of deposit, money market funds and treasuries, but all taxes are deferred for as long as you wish. Some have shown reluctance to purchase fixed annuities because of a concern about the financial strength of the insurance company.
What A Year!
What a year - somewhere between yech and "oh my god". Everyone has felt and will continue to feel the effects of the financial and real estate crisis. There are things that we know, and several of these give us reason for optimism:
Turn Your 401K Plan Into A Guaranteed Pension
After the introduction of 401K plans, pension plans began to disappear. Remember pension plans? Your employer would deposit funds every year and you would receive a guaranteed income at retirement that was based on your years of service, income and retirement age.
Heath Benefits For Those Without
During these times of financial crisis, many employers are facing the prospect of giving up health benefits for their employees. Other firms are going out of business, leaving their employees with the prospect of losing coverage. In addition, many families and individuals are giving up expensive plans because they can no longer afford the premiums.
Surviving Turbulent Times
Like many advisers, we have received numerous calls from clients, asking what to do in this turbulent and scary environment. There are some basic lessons that can serve us all well at this time.
Safe and Profitable
United States treasury securities are generally thought of as the safest investment available. The only problem with treasuries is that the yield is often low in comparison with the needs of those who need income or to accumulate money for retirement. As of today, the yield on treasuries with a one year maturity is 1.68%, on a five year maturity, it is 2.81%, and on a ten year note the yield is 3.65%. Safe, but not very exciting.
Investment Progress Report
In case you haven’t noticed, the investment world has been pretty unexciting for some time. As of June 30, 2008 the S&P 500 index has returned an average of 2.9% peer year. This is in contrast with a historic average return of better than 10%. An average investor, placing his $100,000 retirement assets in an S&P Index fund, saw that fund grow to $134,000 in ten years.
Protection and Retirement in a Single Package
In these difficult times. many of us are being forced to make confusing choices, such as. " If I provide life insurance protection for my family, how will I be able to fund retirement? "
Double Opportunity
The current stock market is generally depressing. Averages of the major market indexes are down for the year, and the general investing mood is depressing. Most of the blame goes to the price of oil and the sub-prime mortgage fiasco. These are genuine problems, but in many cases good companies have been punished along with the bad, creating a very interesting opportunity for double gains, not seen for a number of years.
Trust Trusts
In this investment/saving environment, there seem to be very few attractive alternatives available. interest rates are low, so certificates of deposit and money market funds don't look very enticing. Stocks have been in a steady decline, and high oil prices and credit worries and housing problems aren't going away.
Neat Tax Opportunity
The Internal Revenue Service is finally starting to realize that there is great value in Health Savings Accounts. As more and more people adopt these accounts, the IRS realizes that this will ultimately reduce the pressure on the government to subsidize post retirement health benefits.
An Old Product Revisited
A number of client situations arose in recent months, causing us to revisit an old and trusted friend. Single Premium Whole Life is a versatile and valuable financial product. With all of the recent hoopla surrounding exotic investments, we sometimes forget conservative stable opportunities. Single Premium Life has particular value in cases involving those age 55 and over.
Hold Tight
These are worrisome times. War, real estate doldrums, sub-prime mortgages and more are causing a lot of sleepless nights and nervous days. Our view is that these problems are serious, but there are also a number of reasons to be optimistic. But, for now, let's think about what we should be doing - or not doing.
Interest Rate Opportunities
In light of the sub-prime mortgage crisis, slowing economy and other factors, the Fed has been aggressively lowering interest rates. According to national interest rate surveys the average money market rate is 2.64% and the rate for a five year certificate of deposit is 3.39%. The result of the interest rate decreases has been to create an opportunity for profit for savers.
Retirement Plan Robbery
When 40lk plans were first introduced, some advisors recognized that this was one of the greatest cost shifting strategies in history. Formerly, employers funded retirement plans for their employees. The employer paid all the plan costs and invested all the money. Then 401k plans came along and enabled employees to take on a big part of the funding responsibility for retirement plans. This saved employers billions of dollars.