Tag Archives: stock market

Why it is important to use math, science when planning for retirement

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By Dave Stanley
Integrity Financial Service, LLC

First and foremost, I want to let you know that I would never try to sell you on anything. I have learned in my 40 years of experience that if I try to talk you into something, anybody can come right along and talk you out of it so, that is not my objective. However, with math, science, and reason, I would like to reaffirm some very important facts and figures about your retirement planning:

Math and science are key in helping with retirement planning. (pxhere.com)

1. We all know the market is cyclical, it goes up, and it goes down. We have had the longest upmarket, “Bull Market,” in the history of the stock market; over the last nine years. Thus, Reason alone, tells us that we are due for a market correction, “Bear Market.” Math and science prove that we are due for a soon coming market correction. Just to name a few of the catalysts of a possible Bear Market, but not limited to, are these indicators:

•   The most significant “Buyback” in the history of the market took place in the last quarter of 2018. A “buyback” is essentially corporations run out of ideas to increase stock market shares and dividends of their company. They are buying back their stock held in foreign countries and inflating their profits. As of October of 2018, there were over $800 billion in stock buybacks, a stock market record. Corporations used funds from $2.6 trillion dollars sitting overseas.


•   The tariffs imposed on foreign countries in June 2018.


•   The housing market, as interest rates increase, so will adjustable rate mortgages increase. A Zerohedge chart reflects that home-builder stocks are already dropping as lumber prices forecast a drop in the housing market.


•   Interest rates tend to go up when the federal reserve unwinds its balance sheet and adds to the supply of Treasuries and mortgage-backed securities on the market. When interest rates go higher, stock valuations need to go down with a lower P/E ratio. (Profit /Expense ratio)


•   Federal Reserve policy. A JP Morgan study reflects that the Federal Reserve is decreasing its balance sheet of treasuries and mortgage-backed securities by $50 billion a month, which is known as Quantitative Tightening, which is projected to continue to at least the end of 2020.


•   Valuations. The United States Stock Market is the most expensive in the world at this moment. The Buffett indicator is flashing red with a total market capitalization vs. GDP (Gross Domestic Product) of 150%. Studies reflect that any ratio above 115% is an indicator that the market is significantly overvalued.

2. Historically the S&P time-line for recuperating from market corrections is between 13 to 22 years. Studies reflect that 64% of the time, the S&P is either losing ground or making up losses. Let me ask the question, “Going into retirement, do you want the 64% chance of a market correction and taking 13 to 22 years to recuperate the retirement savings you’ve accumulated over your lifetime?”

Mortality tables reflect that one retiring at age 65 will live 20 to 25 years.

3. Mathematically, it’s a proven fact that if a retiree experiences double-dipping (losing value in their account and drawing income from their account simultaneously) at the beginning of their retirement, they will outlive their retirement funds before they outlive their retirement life. This is known as the “Sequence of Returns.” Also, add the devastating fact of fees, the account now has triple dipping!

4. Psychological studies prove that retirees with a guaranteed, known, and predictable source of income live a much happier, stress-free, and worry-free retirement life.

5. The Fixed Indexed Annuity (FIA) relieves merely the risks of outliving one’s money and the burden of trying to manage and chase market returns and trying to avoid market losses of managing a retiree’s portfolio. It gives a guaranteed, predictable income for life as well as a projected income, based upon only upside market growth. It automatically tracks this upside market growth.

I trust that the above information on math, science, facts, and figures will assist in journeying into a peaceful, stress-free, worry-free retirement.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Misperceptions about market corrections: Are you prepared?

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By Jeffrey S. Williams, Grand Wealth Management

 

In his most recent Berkshire Hathaway shareholder letter, Warren Buffett shared this powerful insight about market downturns:

 

“During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy.”

 

This is a good time to talk about scary markets, since we haven’t experienced a severe one in a while. 

 

Scanning financial news in our calm market, you’ll find the usual range of attempted interpretation about our current market: “We are worried about …” “Economic indicators suggest that …” “Geopolitical events are likely to …” and so on.

 

While it’s highly unlikely the market will remain this calm forever, nobody can predict when it might turn, or why or how dramatically it may spike back up when it does. We counsel against shifting your portfolio in reaction to near-term forecasts. Instead, let’s use the relative calm as a perfect time to do a reality check on what scary markets really represent, and how to manage them when they occur.

 

Contrary to common perception, scary markets can be your friend. Instead of fussing over when the next market downturn may or may not occur, here are some great questions to consider:

  1. Are you taking on enough stock market risk in your portfolio to capture a measure of expected returns when they occur?
  2. Are you fortifying your exposure to market risks and expected returns with enough lower-risk holdings, so you won’t fall prey to your fears the next time markets tumble?
  3. Have you assessed whether your current portfolio mix is optimized to achieve your personal goals and have those goals changed?
  4. Does your current portfolio mix of safer/riskier holdings accurately reflect what you’ve learned from past markets?
  5. Have you carefully considered what a 30% or so market downturn would mean to you in real dollars and cents?

You can prepare for the next down market by having a well-planned portfolio in place today — one you can stick with through thick and thin. Neither too “hot” nor too “cold”, your portfolio should be just right for you. It should reflect your financial goals. It should be structured to capture an appropriate measure of expected returns during good times, and allow you to effectively manage your personal fears throughout.