November Update Client Questions and Answers
I hope that all is well with you! Overall, things are good here at Investments & Insurance Planning Services, LLC. Once again, I participated in the annual “Ask the Expert” phone bank sponsored by the Financial Planning Association of Central Florida. I fielded quite a few calls and it is always a fun event. Keep your eyes peeled if you are an Orlando Sentinel subscriber as you may see your planner mentioned! In addition, I have received some great questions from clients over the last few months and would like to share a few of them with you along with my own thoughts in response.
When will my accounts recover?
Unfortunately, there is no certain answer to this of course but recent history can be our guide. A good period to review is the Great Recession when the stock market declined cumulatively over 50% from the end of 2007 to March 2009. From the bottom of the decline to recovery it took:
36 months for an all-stock portfolio to recover.
19 months for a 60% stock and 40% bond portfolio to recover.
8 months for a 40% stock and 60% bond portfolio to recover.
Ten years later all three portfolios had nearly doubled in value. For more information refer to the slide titled Diversification and the Average Investor below:
How is the election affecting my investments?
Politics, in general, does not affect the stock market in the long term. Stock valuations, Federal Reserve Board policy, and corporate earnings are what drive the stock market’s long-term returns. The stock market performs better during divided governments than when one political party controls the presidency and Congress. Mid-term election years tend to be downers for the stock market. The average decline during a mid-term election year is -16% and the average return the following year is +37%. If history is our guide, then perhaps better investment returns are in store for us next year. For more information, refer to First Trust Client Resource Kit on Mid-Term Elections below:
I feel like my retirement is slipping through my fingers. What can we do?
If you are feeling anxious about things right now, then ask yourself what do I really feel is slipping through my fingers. Ask yourself, do I need all my money next week, next month, or next year? Probably not, but if you do then call me asap. Perhaps it is not simply the declines in values, but the goals that you attach to them that are causing the anxiety. Goals such as having a certain amount of emergency savings, taking a vacation that has been put off since COVID, or helping family and friends who are in need. Often when we solve these goals, then the anxiousness over account values will subside. Avoid allowing these feelings to linger too long. If they don’t pass, then please give me a call, or send me a note so we can explore options together to satisfy your short-term savings goals.
But I am retired, how can I be considered a long-term investor?
Anyone who intends to keep their money invested for five years or more, by industry standards, is considered a long-term investor and I tend to agree. Furthermore, if you are retired and you plan to live another 10+ years, need your money to last your lifetime, have the chance of keeping pace with inflation, and may want to leave a legacy then you need to be thinking like a long-term investor. How much risk you need to take to achieve your long-term goals is another issue altogether and can be addressed by implementing and maintaining a well-thought-out retirement plan as I have previously mentioned many times.
One client explained to me the following: “When we meet, I simply want to know the answers to the following three questions.”
“Did I make any money?”
Very unlikely this year so far, but the fourth quarter is off to a great start and hopefully this rally will continue. Although, for many clients, we are discovering that over the last three years they have still made money. Therefore, this question is based on your perspective.
“Is my retirement plan still on track?”
Your retirement plan will need to be reviewed and updated to get the answer to this question. Many of the plans that we have updated this year are still scoring with a high probability of success. This is a very important consideration for your investment management decisions. If you are not sure where you stand, then let me know and we will do a review together.
“If the answer to either of the first two questions is no, then what are we going to do about it?”
Jump off a bridge together! No, just kidding, don’t do that!!! We will adapt, improvise, and overcome, but never give up. Because this too shall pass. That is the legacy of over 100 years of market history. Bad events that seem unprecedented at the time eventually come and go. Then markets reach new highs and make more money for patient investors. However, this doesn’t mean that we must stick our head in the sand and wait it out. We have added a couple of new funds to portfolios this year, our managers are adjusting and rebalancing portfolios, and we are looking at additional investments that may provide some downside protection and potential investment returns like the expectations of our current portfolio.
Thank you for taking the time to read our client communications and I hope you find them helpful. Please pass this along to others who may be asking the same questions or share similar concerns. If you have a particular topic, question, or interest that would make a good contribution to this effort then please share it with us. In the meantime, feel free to call or write anytime that we can be of service. Thank you for your business and I hope to catch up more with you soon!
Have a friend, co-worker, or family member who recently shared about retiring, changing jobs, needing a financial plan, investment review, or 401(k) rollover? We offer a complimentary consultation for anyone you think could benefit from our services.
David J. Blount
CERTIFIED FINANCIAL PLANNER ™
Investment & Insurance Planning Services, LLC
261 Plaza Dr. Suite B
Oviedo, FL 32765
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations to any individual. All performance referenced is historical and is no guarantee of future results.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that the strategies promoted will be successful.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not ensure a profit or protect against loss.
Stock investing involves risk including the potential loss of principal.
Securities offered through LPL Financial, Member FINRA/SIPC