WHAT IS BICE?

With recent Department of Labor rulings, the advisory world is changing. In certain instances, firms and its advisors are required to act in a fiduciary capacity for its clients. To act in a fiduciary capacity means for a firm/advisor to always put the client’s best interest before their own. I think firms and advisors should always act in a client’s best interest in all instances. Since day one, Pensinger Financial has always acted in its clients’ best interest, we have always put our clients first and will continue to do so.

Unfortunately, there’s a loophole for firms and advisors to exploit to get around acting in their client’s best interest. It is called Best Interest Contract Exemption or BICE for short. By signing this contract, you are exempting your advisor and his/her firm from acting in your best interest, in other words, you are signing away the right of your advisor and his/her firm to do what is best for you. I think it’s wrong and bad. But please know, Pensinger Financial will never use a BICE with you, we will always put your interests first, before of our own.


IT'S THAT TIME OF YEAR: PREDICTION SEASON

This article gets a little math heavy, so I pulled out the concluding paragraph for you to read. It sums up a crucial aspect of the investment management services Pensinger Financial provides your retirement portfolio…

CONCLUSION As the end of the year approaches, it is natural to reflect on what has gone well this year and what one may want to improve upon next year. Within the context of an investment plan, it is important to remember that investors are likely better served by trusting the plan they have put in place and focusing on what they can control, such as diversifying broadly, minimizing taxes, and reducing costs and turnover. Those who make changes to a long-term investment strategy based on short-term noise and predictions may be disappointed by the outcome. In the end, the only certain prediction about markets is that the future will remain full of uncertainty. History has shown us, however, that through this uncertainty, markets have rewarded long-term investors who are able to stay the course.

You’ll never hear us talk about predicting the short-term future movements of your retirement portfolio and that reason is simple – it’s because we can’t; we have no idea if the market will be up or down tomorrow. But frankly, those short-term market movements don’t matter, our focus is on the long-term market movements…the only market movements that matter to you and us. Long-term market movements will grow our portfolios, but the short-term market movements can derail that grow if we don’t focus on what truly matters in the short-term. Over the short-term we don’t look at predicting anything, we don’t look at buying the hot stock or investing in the flavor of the month sector of the economy, instead we focus on what we can control, which are: your portfolio allocations, your fees and expenses, and your tax implications. We do this because we know these areas add value to your portfolio over time, like keeping your costs low for example – our management fee is less than industry average and we use very low-cost portfolios because typically the less you pay in fees the more money you will make…and our job is to make you money. The areas that can severely derail your portfolio’s growth, like trying to predict where to invest next, can ruin your chance of having a safe, secure and comfortable retirement – we won’t take that chance.

THE ELECTION AND YOUR PORTFOLIO

Here’s a sampling of the headlines I took from just today about the election and its impact on the stock market:

Stock Futures Plunge as Donald Trump Posts Surprising Win
Trumped! Dow Tumbles 254 Points on Trump Victory, Republican Sweep
Wall Street to open sharply lower in wake of U.S. election
U.S. stocks crumble on Trump's upset victory
Dow surges to near-record highs following election of Trump
Stocks Surge After Trump Victory
Wall Street surges after Trump wins White House

Again, those are just today’s headlines. Depending on which time of day you hopped online to see the latest financial headline you might draw the conclusion that the end of the world is near (“DOW tumbles”) or it’s not as bad as it seems (“DOW surges”).

It’s important to remember to keep your eye on the long-term movement of your retirement portfolio - the long-term movement remains to be seen based on today’s election results – but historically the long-term movement has had only one direction…UP! And I fully expect that direction to continue over the coming years.

For those of you with heavy stock market exposure we’ve determined your time horizon is long enough to support it, and today’s wild movements have very little bearing on the long-term performance of your portfolio. For those of you with a shorter time horizon we’ve determined your stock exposure should be limited and the bulk of your retirement savings is to be invested in capital preserving investment grade bonds, therefore you are already positioned in a portfolio that can absorb drastic movements in the stock markets.

In short, rest easy and love or hate your new President!

Q3 2016 MARKET SUMMARY

Here you will find DFA's Market Summary for the 3rd quarter of 2016. This market summary report concludes with the article I sent out a few weeks ago about the Presidential elections and their impact (rather, lack thereof) on the stock market. The last line in it: “…there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns” touches upon the foundation of long-term retirement planning.

  1. Patience – the bulk of our investment returns for retirement are generated near the end of our time spent saving for retirement, this time is known as the accumulation cycle, where we accumulate wealth for retirement. This happens because throughout our working years our investments are compounding, in other words, our money generates money, and then that money generates money, and so on. So as our retirement pie compounds the larger it gets will then allow for it to get even larger. Typically the pie is the largest near the end of our accumulation phase when we stop earning an income and we begin to withdraw from our savings to live.

  2. Portfolio Structure – a key foundation to successful long-term investing is to have the right investment portfolio in place. The right investment portfolio is one which gives our money exposure to thousands of companies from across the world, these are big companies we see everywhere and we use their products, services, technology, and innovations every single day, and these are small companies we’ve never heard of before and we might never come across them in our daily lives, and a bunch of companies in between, too. All of these companies make up for a globally diversified portfolio in which we invest our money and with patience see it grow as these companies grow too and share their growth and profits with us.

THE ELECTION AND ITS IMPACT ON YOUR RETIREMENT

"Over the long run, the market has provided substantial returns regardless of who controlled the executive branch.”

There’s a common sentiment that comes around in the summer and fall every 4 years and it’s ‘I’ll wait to see what happens with the election before I do anything.’ The problem with this thinking is the market never tells you when something is about to happen, moreover, it never tells you when it’s about to take off or drop like a rock. No matter who wins, the immediate outcome will be one of three scenarios: 1) the market will go up, 2) the market will go down, or 3) the market won’t go up or down. My job is to make you ignore the short-term movements of the market (which are entirely random and fall into one of the three above scenarios), instead, I want you to focus on the long-term movements of the market, which always fall into scenario one above. And that is why it is imperative we remain invested every single day, doing so over the not so important short-term means we’ll participate in all three scenarios, but over the extremely important long-term ensures we’ll participate in the only market scenario: scenario one.

Below is neat graph and sound conclusion taken from this DFA article:

how does the stocks market do depending on who's in office?

CONCLUSION Equity markets can help investors grow their assets, but investing is a long-term endeavor. Trying to make investment decisions based upon the outcome of presidential elections is unlikely to result in reliable excess returns for investors. At best, any positive outcome based on such a strategy will likely be the result of random luck. At worst, it can lead to costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns.