Two Days of Major Wall Street Selling

Stock prices fell hard for the second day on the exchanges, as the selling continued this week, fueled by the uncertainty of the global economics threatened by the spread of the Corona Virus.

Here's the tally on the popular stock averages today. Three percent losses again were the ending to Tuesday, as the Dow Industrials shed 3.1%, and the S&P 500 lost 3%. The Nasdaq Composite lost 2.7%, the bright spot of the group. All 10 S&P Sectors fell today. Bonds rose a tad and Gold FELL after carrying the heavy load Monday.  A diversified portfolio of short term bonds, long term bonds, Gold and stocks fell 1% today.

My thoughts on this. Monday, Gold and bonds were a safe bet as stocks initially fell. Then today, more folks sold, and some leveraged players had margin calls and sold off Gold and bonds. Traders we'll call them, often acting on the floor of the exchanges on behalf of their clients.

We'll experience a snap back rally at some point. But will this be enough to get back into stocks? We'll see.

It's easy to lose perspective of things when these short term setbacks are the focus of our money. Here are the pitfalls of acting this way.

Don't view the markets from the high point they reached; that will set you up for failure. No one buys at the low and sells at the high (not more than once a lifetime perhaps). So view your investment dollars in a longer time frame. Unless you just started investing, you have a track record, and many years ahead of you.

* instead of 2 days, look at February thus far.
* instead of 2 days, look at the last 3 months. 
* instead of 2 days, look at the last 12 months.

The past decade has been very good for stocks. Really good.
 
Consider two investors, Good Luck Gary and No Luck Bill. Bill invested in stocks in late 2007 near Dow 14,000; before the great recession started to unfold. Today, he's ahead 5.5% average each year since then. Good Luck Gary had cash to invest near the market's lows in early 2009, near Dow 7,000. Today, he's ahead 13.8% on average year-over-year. A big difference you say. Yes. But sadly, we can't find any Bill's or Gary's to prove these numbers. 

Let's take the average of 7,000 and 14,000, as it's more likely that investors bought shares when the market was both falling and then rising. So Dow 10,500 is our entry point now. At 27,000 today, that's a  +8.5% annual return. And these tally do not include dividends of 2% or so each year. Not bad.




So, to be a successful investor, you need to know what is working now and take part in it; limit losses, and have a long term view.

If stocks are working, invest in stocks.
If bonds are performing well, invest there.
If Gold and Silver are picking up steam, invest there.
If you are not sure of how to do this, contact me.


You know by now I advocate strongly being diversified with your money, so you don't get hurt when certain investments go against you. Set stop points to protect your profits - or lessen your losses.

I am finishing up an investor quiz that I will post to all who read my blog next month. 

Stay tuned, and e-mail or call with any questions or comments.

~Barry





 




 

Today's Value of Diversification

Stock markets closed noticeably lower today, with the major USA stock averages falling near 1/2 percent to 1% each for the Dow Jones, S&P 500, and Nasdaq.

Money poured into bonds and Gold today. The 10 and 30 year Treasury obligations rose nicely as their interest rates fell. Those bond's closing rates fell about 1/8 of 1% today - that's a big move in a single day. We follow and invest in the corresponding exchange-traded funds for the Treasury market; IEF and TLT.


IEF is the 7-10 year U.S. Treasury Note, and TLT is benchmarked to the 20 year U.S. Treasury Bond.

IEF rose 1% today, while TLT rose 2% today.

Gold shot up $15 an ounce today on the commodity exchanges, good for a 1% gain.

So taken all together, a diversified portfolio of stocks (Dow Industrials), bonds (TLT), and Gold - you're very likely to have made a little money today - about 0.7%.

On the next blog, I will look at the last bear market in 2007-2009  and compare the performance of the three asset classes of stocks, bonds and Gold during that period.

2020 Changes Affecting Your Finances

2020 could be an important year for your financial planning?

If you are considering buying an insurance-related product, you should listen up! The insurance industry will be implementing - I'll say updating - their insurance pricing guildelines (called mortality tables) as they relate to life insurance, annuities, and similar benefits-based polices.

The reason; American's are living longer. Think 'mortality' which means basically how long you are expected to live. Webster's dictionary defines it as "the relative frequency of death in a specific population; the death rate".

This is BIG news: the last update was in 2001, and the industry had been using those tables to price insurance costs to consumers. Once it is phased in, I see it affecting two types of insurance products being utilized by many of us today.

The good news: Life expectancy's are longer, so life insurance costs are apt to drop. Looking at the Social Security tables on mortality; the government says that in 2000, the average death of a 65 year-old man would occur at 80.9 years, and a women was 84 years. Their 2020 projections are at ages 82.2 for men and 84.7 for women. 


You can also think about this in terms of Social Security. The longer you wait to claim it, the larger your monthly check will be. There are "rumors" out there that the age will be raised to collect social security in the near future. The Government can delay paying you. They can change the rules anytime. Annuities and life insurance are governed by contract law, and not subject to the whims of Uncle Sam or your lawmakers.

The challenge: Living benefits. Think annuity payouts to you, or Long Term Care payments when you can't provide for yourself. Also, the guaranteed "lifetime income" feature of immediate and deferred annuities - and Long Term Care riders on policies will have higher costs because the money will have to be paid out over longer periods. 


In sum, ladies and gentlemen, folks have to act fast to obtain a more favorable solution to their life insurance, annuity and long term care needs. What can you do now?

Get your papers in order. Pull out your policies and arrange a time to review them with me. Perhaps I can help you with a better solution before the rates and terms change.

Thanks for reading. Pass this along to your friends also who may benefit.

Barry L. Unterbrink
Chartered Retirement Planning Counselor
(954) 719-1151 w 
(954) 560-3622 m / text
(954) 642-2253 fax