Time Change, and Financial Strategies Should Change with Them
As the stock market roller-coaster ride that began this winter continues into a third season, I wanted to make this month’s newsletter a brief refresher about why I believe my income-based business model is so appropriate for this new “era of economic uncertainty.” For years my firm’s unique approach to retirement planning has differentiated us from all those financial advisors who are still mentally stuck in the 1990s and, thus, married to outdated, growth-based business models. That differentiating factor continues to help us educate more people each day about how to achieve their retirement goals in an era of unprecedented challenges and risks.
I’ve written about those challenges and risks many times in this space, and none of them have diminished or disappeared. We still have an overvalued stock market that is out of touch with economic realities and influenced more by artificial factors. Inevitably, the markets will have to make fundamental sense again, and I believe the most likely way it will happen is with a major and sustained stock market correction on par with those that occurred from 2000 to 2003 and from 2007 to 2009.
Some analysts have suggested that we may be right on the verge of that correction or that it may have already started based on the historic levels of volatility that began in early February. Market volatility more than doubled on February 5 when the Dow experienced its steepest one-day drop in history. Since then, the volatility index, or “fear index,” has experienced six sessions that saw a jump of at least 20 percent. 1
Is it possible that the volatility will diminish and that the market will get back to the upward trend it started on in March of 2009, a few months after the first round of quantitative easing was launched? Well, anything’s possible—but is it likely with so many potential tipping points for a sustained market downturn in place? There are uncertainties around trade, oil prices, China and South Korea, the European Union, interest rates, inflation, the federal deficit, and—especially—GDP growth, which even the Federal Reserve has forecast will be considerably lower in the next three years than the 4 percent initially promised by Donald Trump.
Generational Challenges
Again, we’re living in a brand-new age of economic uncertainty, one in which many of the old textbook rules and guidelines for investing and retirement planning have become outdated, if not downright obsolete. Adding to the need for new rules and strategies are a host of financial challenges unique to today’s generation of retirees and near-retirees—challenges that our parents and grandparents didn’t face.
I’ve discussed these issues many times in this space as well. They include the near-disappearance of defined benefit pension plans, the ever-rising cost of healthcare, the fact that many people near retirement age are caring for aging parents and/or grown children, and the fact that life expectancy rates today are higher than ever, meaning that people need to prepare for up to 30 years of reliable retirement income.
So, how does a differentiated business model like ours address these uncertainties and challenges more effectively than the outdated models favored by many advisors? Well, if you’re a client and a regular reader, you already know the answer. Still, I’d like to briefly summarize it once again, and encourage you to share the information with friends and relatives you think might also be “mentally stuck in the 90s” and possibly carrying too much risk because of it. It’s possible that in learning more about the income model, the proverbial “lightbulb” might snap on over their heads (as it does for many people), once they understand that investing for income actually requires reducing your investment risk, not increasing it, as is commonly believed.
Total Return = Income + Growth
Again, that’s because total return is a product of both growth (measured in capital appreciation) and income (generated through interest and dividends). Many people are taught that in order to increase your returns you must increase your growth through old-fashioned buy-and-hold investing in the stock market. But, they aren’t taught that this approach doesn’t work in a long-term secular bear market cycle like the one we’re in now. In this kind of market (and especially in the midst of so much unprecedented uncertainty), growth can quickly turn to shrinkage, as investors learned the hard way with those major market downturns that began in 2000 and 2007.
When you focus on increasing your returns by increasing your income, however, it means you’re typically investing in bonds and bond-like instruments and other vehicles designed to decrease volatility and better protect your principal from a major loss. You’re decreasing your risk in order to increase your income, which also puts you in a position to strategically grow your portfolio “the old-fashioned way,” by re-investing in other income-based vehicles.
This is a specialized approach uniquely designed for today’s challenges, but it’s an approach best taken with the help of a qualified advisor who specializes in this kind of differentiated business model. So again, I encourage you to share this information with friends and family, but preferably with the disclaimer: don’t try this at home!
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Ryan Vlastelica, “There’s been a historic amount of earthshaking stock-market volatility this year,” MarketWatch, last modified on April 11, 2018, https://www.marketwatch.com/story/theres-been-a-historic-amount-of-earthshaking-stock-market-volatility-this-year-2018-03-22
“Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. Wright Financial Group, LLC and Sound Income Strategies are not associated entities.”
NEW EVENTS
Social Security Workshop 6/21/18 & 6/26/18
Maumee, OH
Now that the new administration is in office, what changes are coming? New laws or modifications to past laws may impact your benefits and the way you make your election. Your Social Security claiming strategies can vary dramatically depending on numerous factors the government doesn’t share directly with you. Often, you must find out the information on your own.
Come and learn more at this group presentation, hosted by local retirement specialist, David Wright. This educational event will cover the basics of Social Security and reveal the latest strategies for maximizing your benefits.
For more details check our website, call the office (419) 885-0907 or send us an email atinfo@wrightfinancialgroupllc.com
IRA 7/19/18 & 7/24/18
Monclova, OH
Many people contribute to their IRAs, 401(k)s, and other qualified retirement plans for years without fully understanding the rules, tax implications and options that are available to them – until it’s too late. It’s like driving down the road to retirement without a map (or nowadays, a GPS).Please join David Wright for a presentation especially for retirees or those retiring soon. He will explain (in plain English) important IRA rules and tax saving strategies, along with common costly mistakes that are easily avoided – if you know what you’re looking for.
For more details check our website, call the office (419) 885-0907 or send us an email at info@wrightfinancialgroupllc.com
Estate Planning 7/26/18 & 7/31/18
Rossford, OH
Often times, an Estate Plan is vital for any individual, couple or family that owns a home and has assets. It’s time to make sure your Estate Planning is in good order. You will learn various methods on how your family can be protected from unnecessary legal fees and wasted time with Probate and potentially prevent the loss of your hard earned assets from a Nursing Home should you require care. This seminar will provide you with facts that are straightforward and easy to understand.Estate Planning.
- The advantages and disadvantages of Wills and Living Trust.
- How Powers of Attorney work (some Power of Attorney may not be valid and thus Powerless if you become disable).
- How Probate works, and why you may want to avoid it for your family.
- Why putting property in children’s names may be a mistake.
- How to protect your home and your savings if you end up in Nursing Home.
- How you may be able to protect assets inherited by your heirs from lawsuits, divorce, and other claims.
For more details check our website, call the office (419) 885-0907 or send us an email at info@wrightfinancialgroupllc.com
RADIO SHOW
The Retirement Income Doctor Show
Join us every Sunday at 12:00pm on WSPD Radio 1370 AM / 92.9 FM. Dave will be hosting “The Retirement Income Doctor Show”.
The Retirement Income Doctor radio show was created to address the questions and concerns of retirees, pre-retirees, individual investors, and business owners. Check out past episodes of the Retirement Income Doctor here.
If you know of a friend or family member who needs our services, please contact us and we will be happy to help them. Click on the link to complete and submit your information or call our office at (419) 885-0957 to set up a Free Financial Analysis!
MONTHLY TIP
Financial Physical
Do you have a healthy portfolio that may have a few unhealthy habits? Make sure your portfolio doesn’t deteriorate before retirement. Make your pain-free (no cost) appointment for a top-to-bottom financial physical. Spend just an hour with us and determine if your finances have any of the risk factors that 7 out of 10 Baby Boomers suffer from. Take control of your financial health and get your diagnosis today.
Call Matthew at (419) 885-0957 for more information and to schedule your appointment!
MONTHLY NOTE
“Failure is simply the opportunity to begin again, this time more intelligently.” – Henry Ford
This is definitely a good quote to live by! Remember, failure can be used as a learning experience and opportunity for growth.
