Here you will find a PDF of the Q2, 2022 Quarterly Report. On page 3 you can see that stocks and bonds suffered mightily in Q2, and I know this is tough to see, but this is just a temporary snapshot of market activity. So, let’s compare this snapshot to what we see on page 4. Remember losses are temporary, gains are permanent. The 1 Year numbers look bad, but, if we are investing for retirement and, more specifically owning stocks, we must have a long-term outlook. 5 and 10 Years isn’t that long for retirement planning purposes, but it’s great to see stock and bond ownership over 5 and 10 years is all green arrows. As investors we should take a lot of comfort in that. Times are tough right now, but when it comes to stock market investing we know two truths: we will hit a bottom and we will make new highs again. We just don’t know when. And that is how we build wealth for retirement: owning stocks and bonds for the long haul. When we do, we get the bad with the good, but we ultimately get far more good than bad. Bad is temporary; good is permanent. I want to turn your attention to this article on page 16 written by Marlena Lee from Dimensional, and I highlighted a key sentence from her: “Reacting to down markets is a good way to derail progress made toward reaching your financial goals.” Down markets are not reasons to sell, down markets are not reasons to move to cash. Rather, down markets are great buying opportunities to buy into great companies while they’re on sale. If you’ve been through some down markets before, do you look back and say, “ohhh, I wish I woulda bought back then?” If you can support owing stocks – and remember stocks are a long-term investment only – then the graph here shows you there have always been up and down gyrations to the stock market, but there’s only one true direction…and it is up! So consider down markets great opportunities to go back in time and to buy those stocks at lower prices, and you can see from the graph those lower prices will presents themselves (and they’re doing it right now, too), but they won’t last forever. If you need some investment guidance, reach out to me through my contact page.
Instant Gratification is Lost on the Stock Market
The stock market doesn’t care about our need for instant gratification. More than ever today, we live in a society where we need immediate fulfillment – we immediately go to our phones to answer a question, we assume the point of an article just by reading its headline, and we try to express our thoughts in a short Tweet. The internet is amazing, but it made us so impatient. And long before we had the internet, we had the stock market. We cannot apply today’s standards of expectation of immediate gratification to our retirement portfolios.
To be a stock market investor means we have a several decade outlook to build our wealth. If our timeline is six months, or even a couple of years, stock ownership is not for us. Stock ownership means we have to be able to tolerate long periods of sideways markets and we have to be able to stomach down markets, too. Investing for retirement purposes will not give us immediate gratification; rather, it is a long slow and sometimes volatile rise towards wealth building.
When it comes to the stock market, stop looking. Stop looking at it, stop looking for that instant buzz, and check in on your portfolio once a year. There is no instant gratification to be found there. And if you are getting that immediate jolt – whether it be positive or negative – then you are not properly planning for retirement. If this is you, I can help. Reach out to me at my Contact page. And check out this blog as a video.
Market Update for the Week of April 25th, 2022
Markets have been very volatile lately. Up big one day and down big the next. We do know markets move quickly, and that’s been on display over the last month of trading, too. Right now, the stock market – as measured by the S&P 500 – is at prices we saw a little over a month and half ago. But we’re also at prices we saw in May and June of last year. And what was going on at that time? We were making ALL TIME MARKET HIGHS. So, we’re at prices that were all-time highs about a year ago and I bet you feel a lot differently as an investor now than you did back then, right? But the prices are the same.
Let’s look positively at this: the market is giving you an opportunity – possibly a one-time opportunity cuz maybe we never see these prices get any lower – to buy into good stocks at prices it was offering about a year ago. And since that point a year ago, the market went up over 14% before coming back down. And what do we know about the market? It NEVER stops making new all-time highs, but it NEVER makes new lows - even when adjusted for inflation. The market goes up and down, but it only has one true direction, and that is up.
So see right now as an opportunity to get in the time machine – a DeLorean, of course – and go back and invest in May of last year. How do you do that?
Make your 2022 IRA contributions, start contributing to a workplace retirement plan like 401(k) or 403(b), or bump up what you are contributing, if you have some extra cash because you have no high interest debt and your emergency fund is adequately funded, right there’s an opportunity for you to put some cash to work and to ultimately make money on that cash. If you don’t have additional cash available, that’s OK, just sit tight. We’ve seen this before and it just takes time to come out of it. And at some point in the future we’ll make new highs again, and you’ll look back and say the market was giving me a great opportunity and I took advantage of it.
If you need a professional to guide you through these tough times, contact me. And check out this blog post as a video here.
Q1, 2022 Market Summary Report
Go here to view the Q1, 2022 Market Summary Report. Q1 was a tough one for stocks and bonds; it was a double whammy. If one asset goes down, you’d, of course, like to see the other asset go up to help balance out those paper losses. I write paper losses because it’s only an actual loss if you sell. So, what prompts selling? A change in your investment strategy should be that answer. Has your long-term several decade retirement planning strategy changed because of one bad quarter? I hope not. If it did, then you’re not seeing the forest for the trees. In this quarter’s report on page 16, you’ll find a great article written by Dimensional’s vice president, Weston Wellington, you’ll see his answer to the question of, “Should I be doing something different with my portfolio?” The short answer is, “No,” and the article provides some great research driven data behind why we shouldn’t. So, it was a tough quarter, but tough quarters and even tough years happen, but both are more the exception rather than the rule. So put a sound investing strategy in place, get invested, stay invested, and your future self will thank you. To view this blog as a video go here.
How To Give Your IRA an Earnings Boost
This post (and accompanying video) is about how to give your IRA contributions an earnings boost…and the simple answer is time. Most investors wait until the tax filing deadline to make their IRA contribution, and that contribution is actually for last year’s tax year. At the time of this writing, I have the ability to make my 2021 IRA contribution, but I can also make my 2022 contribution now, as well. So I can actually get my current calendar year’s contribution in more than 15 months before the deadline. For example, 2022’s contribution I have until tax day of ‘23 to make, but I can actually get it in as early as January first of ‘22. Is there an advantage to doing this? There is. Think about it, I can give every single IRA contribution an extra 15 and a half months to compound, that’s an extra 15 and half months to work for me and to make me money. Year over year stock market movements are different, but, by and large, we start in January and get higher by December because more often than not the stock market gives us more years of positive returns than it does of negative returns. If you can afford it, get in the habit of making your IRA contribution as soon as that window opens in January, not when that window is about to close in April. Your future self with thank you for the extra money.
Feb. 24, 2022 Market Update
There’s been a lot of worldwide political uncertainty to the start of 2022. Inflation concerns and possibly upcoming interest rate hikes were top of mind in January, and now we have Russia’s invasion of Ukraine with airstrikes in the capital and other cities.
Uncertainty and geopolitical turmoil can definitely shock stock and bond markets. Today, Feb. 24th we saw the S&P 500 DOWN 2.45% at breakfast and by our midafternoon snack it finished the day UP 1.44% - that’s over a 4% swing in one single day. Markets move quickly to the down- and upside.
As this turmoil relates to your retirement portfolio, what can you do about it?
First, an understanding and an appreciation that we have it pretty good here – we are well insulated on our side of the world, so we’re lucky to not have to face those concerns of being invaded. But as it relates to our retirement portfolio, understand markets move quickly, so stay invested every day – you’re not gonna pick the right time to be in or out. Remember market down moves are temporary, but market up moves are permanent. It just takes time, and if you have a heavy stock exposure already, that means you already knew and understood that time is on your side and you have to be invested for the long-run. Secondly, diversification is - and will always be - your friend. Having exposure to big and small companies in the US, having exposure to established international companies, and incorporating some emerging market and global real estate exposure will help to smooth out the volatility and offer some baked in protection. And then lastly, you look for opportunities to take money from areas that have done really well and shift that into areas that haven’t done so well - this is called rebalancing. Stay with that approach over the long-term - and long-term is several years - and decades and your resolve will be rewarded with a sizeable nest egg to ensure a safe, secure and comfortable retirement. If you’re not comfortable doing this on your own, reach out to me at pen-fin.com.
To watch this blog post as a video go here.