how to measure returns

market returns - how you measure matters

In a recent conversation with a potential client, he was telling me about his investment experience. He mentioned how he has heard how great the last 10 years in the market have been, but he doesn’t feel that his portfolio has grown nearly that much. I believe there could be several reasons for this, and part of it could have to do with the way investment returns are realized and measured. It’s now been 10 years since we hit a market-bottom during the Great Recession in March 2009. Given that, if you look back on 10-year returns for many investments, they look great, but does that tell the whole story? Let’s look at returns for the S&P 500, which has been the best performing major index over the last decade. Period                                                   Annualized Return           Notes 10 Years5/10/2009 – 5/9/2019                                    14.3%                    Recent 10-year period starting                                                                                                              in May 2009 12 Years5/10/2007 – 5/9/2019                                    7.75%                    Going back just 2 additional                                                                                                                 years reduced returns by                                                                                                                       almost half                                   20 Years5/10/1999 – 5/9/2019                                    5.87%                    The last 20 years include the                                                                                                      tech bubble burst early in                                                                   the 2000s The most recent 10-year numbers may feel misleading for several reasons. First, you only really feel like those were your returns if you happened to get in near the bottom. If you were fully invested in the S&P 500 prior to the 2008 recession, it took you until 2012, or over 4 years just to get back to break even. Second, this index is 100% in US stocks, which is likely not an appropriate portfolio for most investors nor how most people are invested (and if they were, the “lost decade” of 2000-2010 was not a fun experience for them), especially as they approach or are in retirement. One additional note, it is often said that long term returns of the stock market are 10-12%. But here again, the timing can make this number vary widely. Crestmont Research looked at different 20-year return periods of the S&P 500 and found that returns over twenty-year periods ranged from 3.1% to 17.1%. Therefore, be cautious when using averages and assumptions when planning, and have a strategy for when they deviate. Takeaways: - Market returns can vary widely over various time periods - You can’t control when a market is going to zig or zag, but the timing can have a significant impact on your plans - Have a purposeful investment strategy matched with how you plan to use your investments to deal with the ups, downs and uncertainty of the market - If you are needing to take withdrawals from your accounts, be sure you understand the concept of “sequence of returns (market timing) risk” and have an income strategy that takes the ups and downs of the market into account, to give yourself the best chance of not depleting your portfolio - Broad diversification can help smooth out returns  Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantee against market loss or greater or more consistent returns. An investor cannot invest directly in an index.   Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

Q1 2019 Market review

The first quarter of 2019 was a welcome move upward after the dip at the end of last year. The US market rallied and was up over 14%, while international and emerging market stocks were each up around 10%. Bonds both in the US and globally were up almost 3%. For a detailed Market Overview, click here. Planning note: The tax filing deadline is next Monday, April 15th. If you haven’t maximized your retirement account contributions but are able to do so, be sure to get those contributions done right away. If you have questions about this feel free to contact me or discuss with your tax preparer.  Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

Taking care of aging parents

I’ve had many conversations recently with people having to spend more time and effort helping their aging parents, and I’ve seen it in my family as well. Though every circumstance is unique, there are a few ways we can start to prepare. The issues vary from mental and/or physical decline to depleting financial resources. Below are some statistics compiled by Morningstar regarding the stage of life I’m referring to: - 52%: Percentage of people turning age 65 who will need some type of long-term care services in their lifetimes. - 2.5 years: Average number of years women will need long-term care.- 1.5 years: Average number of years men will need long-term care.- 14%: Percentage of people who will need long-term care for longer than five years.- 33%: Percentage of Americans over age 85 who have Alzheimer's dementia. - 57.5%: Percentage of individuals turning 65 between 2015 and 2019 who will spend less than $25,000 on long-term care during their lifetimes.- 15.2%: Percentage of individuals turning 65 between 2015 and 2019 who will spend more than $250,000 on long-term care during their lifetimes.- $97,455: Median annual nursing-home cost, private room, 2017.- 83%: Percentage of care provided to older adults that is delivered by friends or family members. - 65%: The percentage of caregivers who are female. Preparing for this stage of life is challenging as everyone’s journey is unique. That said, in my experience, people who have the conversations before they are faced with having to make these decisions are better prepared and less stressed. Some families have no problem talking about this, but many find it challenging. Reassuring parents that this conversation is for their benefit so you understand what their wishes are, and approaching it out of love and care is a good starting point. Here are a few areas to address:Personal- What are your parents’ wishes related to their care?- Who is going to provide care and how will it be paid for?- Should they move and if so when and where?- If there are multiple siblings, who will play what role? Health- Discuss issues related to potential health challenges including mental decline, and how that should be handled. This can include topics of their safety when living alone or driving.- Be sure documents are in place that provide instructions on who can make healthcare decisions if the individual isn’t able to do so on their own (medical power of attorney). Finance- Take inventory. Make sure someone is aware of what resources are available, how they can be used and if it looks like there is enough to meet the wishes discussed.- Is long term care insurance in place or should it be considered?- Should and can the caregiver, if a family member, be compensated? Many people are unable to work and be part or full-time caregivers, so some compensation may be needed.- Be sure documents are in place that provide instructions on who can manage finances if the individual isn’t able to do so on their own (medical power of attorney). Again, communicate early. This conversation needs to take place as a sign of love and care for your family. It may feel uncomfortable at first but can save a lot of time and stress down the road. Lastly, having an estate plan including financial and healthcare powers of attorney, wills and a trust can make things much easier when these events arise. If you would like a referral to a great estate planning attorney, let me know.   Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

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Retirement Planner in San Diego

 

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557​

Rancho Bernardo Financial Planner