2014's Uncertainty Cautions Diversification, Gameplan

The financial markets thus far in 2014 are hinting at uncertainty after a robust 2013, which could lead to more volatility and deep losses if you are not prudent with your money.

The bond market fell prey to higher interest rates last year, as losses across the board of maturities perhaps were downplayed or glossed over due to the superb +25% gains in most stock market averages.

Meanwhile the play on the precious metals worsened as the year unfolded, Gold lost $450 per ounce, and silver much more (-35%) on a percentage basis. That broke Gold's 12 year run of positive returns.
You see, because of how we are wired, we will feel worse off by giving back gains if prices fall, than you would feel if you had not participated in the markets or sectors that performed nicely. You perhaps can stomach not owning more stocks because you're not a risk taker, and can't sleep with being 100% in the market. That's oaky and prudent, but do not surrender gains in stocks and bonds, hoping to recoup those profits holding on. An interesting stat is that long term bonds have lost price (total return) in more years than stocks since 1971, 11 times vs. 10. Sure the bond losses have been sanguine in comparison, but it was still a loss.

2014 is just one-month old, but the trend so far seems to favor the bonds and precious metals. Gold has jumped $40 an ounce this month, or +3%, while silver is about even. Widely diversified bond ETF's such as LQD and AGG are ahead +1.5% as the month closes in a few hours, not including the dividends to be paid next month. Not bad. And with the flurry of high tech earnings announcements out this week, Apple, Amazon to name two; their shares are cratering and taking down others in their path. The Dow 30 components suffering so far in '14 include oil (Chevron, Exxon), inurance (Travellers), along with 3M Co., and Proctor and Gamble, off 5% to 9%. Just 7 Dow 30 Average stocks trade with gains thus far in 2014.

I would surmise (not a prediction) that the best may be behind us for stock market gains short-term. So how does that help you? Be vigilant and stick to your plan - or develop one fast. Upgrade your stocks or mutual funds for better performing selections, determine your allocation in stocks and bonds that will allow you to sleep well. Watch the charts for cross-over and stops. Don't let emotions be part  of the decision-process. That rarely works to your benefit.

If you're not sure how to get this going, give a call or reply to this blog. I'll show you how to set up a system to help you manage your important money in good times and in bad.

Barry Unterbrink
Chartered Retirement Planning Counselor
Fort Lauderdale Florida
(954) 719-1151
Unterbrink@usa.net

2013 Financial Review and Outlook

                                              
  First off, the U.S. stock market ended 2013 with big gains. The popular broad market averages rose 25% to 30%, with not much of any pull-back along the way. The easy money policy of the Federal Reserve kept interest rates very low, leading money into stock-based investments and out of low-interest bonds and fixed rate offerings. Most bonds (government, corporate) lost money, except the high yield category, up 6%, which compensates investors for the risks of rising interest rates by offering higher coupon interest.

  Fixed interest investments, such as fixed annuities, where your principal deposit is not subject to losses, improved as the year chugged along. (Remember, the Fed sets short-term interest rates; longer term rates, 5, 10 years, are set in the marketplace), so when interest rates rise by investors buying and selling, your income will increase because of competition for borrowers. The 10 year U.S. Treasury Note provided about 30% more income to an investor at the end of 2013 vs. 2012. Those rates rising trickle across many areas that affect our lives: mortgages, auto loans, CD’s, annuities, etc.

  So, the take-away point here is: it’s time to review your stock and bond holdings, and fixed rate investments to determine if you could earn more money this year and reduce your risks. Some options available: re-allocate stock market money to bonds or cash. Bonds can be sold and that money invested at a higher interest rate in other bonds. Annuities can likewise be upgraded by tranfers, free withdrawals or partial surrenders, moving money to a higher interest rate or better benefits – while keeping their tax-deferred status. Also, if your annuity is paying out income to you, or you are taking withdrawals, there may be features that could enhance your income – now or later.    
  I’ve spent many years dealing with these retirement planning products, so perhaps I can improve your situation this year. Give me a call and find out.

  Lastly, don’t go around sulking because you didn’t make a boat-load of money last year in stocks. Recall 2008-2009’s over 50% drop in prices. The risk of loss is still lurking about, in good times and bad. Risk may be sleeping now, but it can awake at any time.

  Set your expectations for your money, and then find a strategy that gets you closer to your goal without taking on excess risks. Keeping ahead of inflation and taxes, the twin evils of finance, is a good base-line strategy to aim toward, regardless of what type of investor you are.
 
Warm Regards and success for you in 2014 !

~Barry Unterbrink
Chartered Retirement Planning Counselor
Fort Lauderdale, Florida
(954) 719-1151

It's All About the Strategy

It’s All About the Strategy                                      
Tough questions to ask yourself before retirementby Barry L. Unterbrink

Americans have experienced a huge change in their thinking the past 7-10 years in how we view our money in retirement, and it may affect our pocketbooks for years to come.

First think back 25 years or so; you worked for one employer, retired after 20-30 years, and collected a defined benefit or pension for your lifetime. In the 1970’s qualified plans (IRA’s, etc.) were developed and became popular as an option to save and invest, normally with your employers blessing and match of dollars in some cases. Non-salaried people could also then enjoy some savings as well through IRA’s. Employers generally loved these new options, as they began to phase out their benefit plans, transferring the risk and management of their retirement savings onto their employees shoulders. The good news: the trillions of dollars today sitting in IRA’s, 401k’s and similar retirement plans is a testimony to Americans’ discipline to save for their future when they leave the workforce.

More recently, year after year of low interest rates have affected our ability to "earn" enough to offset inflation and taxes. New challenges face millions of workers today on a number of fronts.

First, how do I effectively manage my money? What’s a proper strategy to use? What are prudent allocations of money between stocks, bonds, cash/other to use at various ages. What's a fair fee to pay? How much employer stock is appropriate to own? Do I have an exit strategy with my money; when to sell or reduce the risks? 2008 taught us about risks in stocks, down 38%. So did 2001-2002.

Next, how do I turn on a source of income from my "pot" of money when retiring? What will interest rates be? Tax rates? What are your options when you need the money to live on? How much can be taken each month without running out of money in the future? What if I retire when my account balances are down? When will that happen next?

I apologize if I’ve left you with more questions than answers today. There are solutions in the financial markets and through the banks and insurance companies that can will help you "get a firm" handle on your retirement money now and when you need it the most. My next post will address some solutions before year-end. So stay tuned at http://moneyruminations.blogspot.com

Barry L. Unterbrink
Chartered Retirement Planning Counselor