Watch this post as a video. A strong January provided enough energy to ultimately overcome March’s negative bank headlines to give us a much-needed positive quarter to start the year. Some of those dour bank headlines were: FDIC’s takeovers of Silicon Valley Bank and Signature Bank; UBS agreeing to buy Credit Suisse for more than $3 billion dollars; and a handful of regional banks following in the path of SVB and Signature by shuttering their doors, as well. Worrisome headlines for sure, but when headlines worry you, bank on your investment principles. And that leads into the DFA article on page 15 of the Q1, 2023 Quarterly Report. I highlighted a couple key sentences / bullet points. There will always be market uncertainty in the short-term; those uncertainties, or new news, or market events that we don’t know yet how to react to drive the market’s daily ups and downs. But the long-term direction of the market is up, it’s proven that to us over a century now. So take comfort in that market certainty that its only long-term movement is up. Hope is not a strategy, and repeated market timing is hope. It’s hoping that you’re getting correct the short-term market movements. Rather, if you stay invested every single day, you’ll get the bad with the good, but over the course of your investing lifetime, you’ll get far more good and more of it…and that’s how you build wealth for retirement. Thanks to financial innovations like mutual funds and ETFs, we investors have easy access and entry to investments from around the world. And now especially with brokerage fee compression over the last few decades, we can do it for super cheap, too. When you think about it, it’s amazing how easily I can tap a couple buttons on my phone and invest in thousands of companies domestically and abroad. That is diversification! And it’s a great way to reduce external forces that can negatively impact your retirement portfolio. To wrap up, we saw negative news in Q1, and there’s going to be something negative in Q2 and so forth, but don’t let that derail your retirement portfolio. Control what you can control: how you react, time in the market, and diversifying your assets. If you need help, contact us here.
"Sideways" Trading and how you can use it to your advantage
Go here to see this blog post as a video. The start of 2023 after a very tough 2022, what did we see in the stock market? As measured by the S&P 500, we saw it up almost 6.2% in January. Great, right? But then it was down 2.6% in February. So, what do we make of this? What we’ve seen over the first two months of 2023 is called “sideways” trading. Up, down, up, down with no real stock market direction. Will sideways trading be the trend for 2023? We’ll find out come Christmas. But, sideways trading is good for two reasons. The first and most simple: sideways trading is obviously better than negative trading AKA when the market goes down. Naturally, we would all much rather have sideways trading than a repeat of 2022. Secondly, and most importantly, sideways trading gives you, the investor, an opportunity to hop on board before stocks take off again to someday soon make new highs. Before the market takes off again, use this sideways market as an opportunity to get your IRA, 401(k), and other retirement contributions into their respective accounts. The market is currently presenting you with a great opportunity to get in before it takes off again…and the sooner you can get money into your accounts, the more time you give it to grow and to compound. And time in the market is the best way to build wealth for retirement. If you need any help with this, reach out to me here.
Q4, 2022 and Year End Review
To watch this blog in video format go here. Typically, for quarterly reviews I put in a graphic showing how major markets faired over the previous year, but who wants to see a bunch of big red down arrows? I know, I don’t, besides, you know your portfolio took a big hit in 2022, but if you’re a glutton for punishment, here you go. So, let's look at the bright side. What has happened after a down stock market year as measured the by the S&P 500? Often, the market was positive the next year. The last time it wasn't, was the years surrounding 9/11, and the last really big down year was in 08. 2022 wasn’t as bad as 08, but it was still pretty bad. But there is a key difference to point out: during the financial crisis of 07 and 08, we had far greater overarching problems with our global financial system. The 2022 down market was driven mainly by pesky inflation. Inflation, when not kept in check, can be a serious problem, but, I think the Fed is doing a good job of facing inflation head on with a "short term pain, long term gain" approach with their multiple aggressive rate hikes last year. So, will 2023 be positive? I'll let you know come Christmas-time, but, we're off to a good start, and hopefully we can add to that long list of positive market returns the year following a negative one. So, get in those IRA and 401(k) contributions while markets are still down because they won’t be forever. And remember, down markets are temporary, up markets are permanent. If you have any questions, reach out to me here.
Be Greedy When Others Are Fearful
Watch the video version of this blog here. There’s a saying on Wall Street, “be fearful when others are greedy and be greedy when others are fearful.” And diving into that motto is one area of deep value I bring to my clients. When my clients’ portfolios are faced with the uncertainty and adversity of heavy selling pressure – something we’ve seen a lot of through 2022 – I stay calm and focused for them…and I take a rational approach to building retirement wealth for their portfolios. And that rational approach is simple: to buy. I’ll show you what I mean.
Below is a chart of the S&P 500 for the last year. I circled two areas in green where we bought. And this is the key to building long-term wealth. Markets going down are temporary, but we don’t know when or how low it will be before these sell-offs stop and ultimately turn around. So we pick points where we say, “alright, we’re going to put some money to work.” Now we don’t know where the bottom will be, but if we make waves of buying and portfolio rebalancing when these new lows hit, we WILL get it right at some point and we will be rewarded for our resolve in the face of adversity – we will be rewarded for being greedy when others are fearful.
Maybe you are too worried to do something like this, or you don’t have the time or knowledge to do it yourself. If so, and you want me to bring this value of wealth building to your retirement portfolio, then connect with me through pen-fin.com. Thanks for watching, have a happy Thanksgiving, and please remember, past performance is not indicative of future results and this video is not a recommendation to take action on any security.
Q3, 2022 Quarterly Report
It’s been another rough quarter for stocks and bonds – something I’ve said three quarters in a row now. Go here to see our quarterly report for Q3, 2022 and you can watch this post as a video here. I can’t predict the future, but I think 2022 will end in the red. It’s tough to see, but it makes sense, we’ve had three years of a very strong market, so we’re due for a come back to reality cooling off period. I know it’s tough to see our portfolios take a hit like this, but let’s look positive. The market is holding steady, giving us an opportunity to put money in at depressed prices before it takes off again. And it will take off again, because it always does. It’s just a matter of when, not if. Typically, when we have a big down year, we follow it up with a strong year…maybe 2023 will be that strong rebound, or maybe it won’t happen until 2024? Will we finish this year down 20% or so or will we claw our way out of this bear market to finish the year maybe down 10%? We’ll see come December 31st. But in the meantime: stay grounded, don’t let your emotions get the better of your sound financial judgement, continue to make 401(k) and IRA contributions and continue to invest those contributions into a low-cost globally diversified portfolio - which is the best way to build wealth for retirement - and, in time, we’ll come out of this to make new market highs and our resolve through this tough 2023 will be rewarded. If you need any help staying grounded during these tough investing times, reach out to me here.
A Look at 2022 and What It Means Going Forward
Go here to see this blog post in a video. I recently read how the S&P 500 had closed below its 200-day moving average for 110 trading sessions, which is the longest streak since the bear markets of 08 and 2000 through 2002. A moving average is a form of technical analysis which takes what has happened and displays it in graphical form on a chart. Technical analysis is used by some to take past events and attempt to use them to predict what will happen. Will they be right? Only time will tell. So, let’s look at what has happened after those two bear markets. How did the S&P 500 perform coming out of those markets?
Coming out of 2002, the market returned 28%, and the next 3 years it returned 14% per year and over 5 years it returned 13% per year. Coming out of 08, the market returned 26%, 14% on average for 3 years, and 18% on average for 5 years. What has happened won’t predict what will happen, but negative returns are temporary, and we just don’t know how long they will last. It’s looking like 2022 will be a negative year, but those negative years always lead into positive years – we’ve seen it before, we’ll see it again – but now is a great opportunity to get retirement money into the market before the next market turnaround takes off. Just think about it, if you could back and buy stocks in 02 and 08, would you? We’re faced with that same opportunity right now, so take advantage of it!