Ten Years, Tremendous Gains. Do Your Investments Match Your Risk Tolerance? Insurance When You're Young and Single.
by Rita Wilczek on Apr 25, 2019
Greetings,
Hope this finds you well having survived tax season.
Thought you might find at least one of these e-articles of interest.
If you have made tremendous gains in the past ten years and you are retired or retiring soon, this may be a good time to review your investment mix to align with your 2019 Risk Tolerance (Tolerance for Loss).
Let us know if we can be of help.
Rita
Ten Years, Tremendous Gains
A look at where stocks were in 2009 and how they have performed since.
Provided by Rita Wilczek
Where were you on March 9, 2009? Do you remember the headwinds hitting Wall Street then? When the closing bell rang at the New York Stock Exchange that Monday afternoon, it marked the end of another down day for equities. Just hours earlier, the Wall Street Journal had asked: “How Low Can Stocks Go?”1
The Standard & Poor’s 500 stock index answered that question by sinking to 676.53, even with mergers and acquisitions making headlines. The index was under 700 for the first time since 1996. The Dow Jones Industrial Average tumbled to a closing low of 6,547.05.2
To quote Dickens, “It was the best of times, it was the worst of times.” It was the bottom of the bear market – and it was also the best time, in a generation, to buy stocks.2
The next day, a rally began. Buoyed by news of one major bank announcing a return to profitability and another stating it would refrain from further government bailouts, the Dow rose 597 points for the week ending on March 16, 2009. On March 26, the Dow settled at 7,924.56, more than 20% above its March 9 settlement. The bull market was back.3
This bull market would make all kinds of history. In fact, it would become the longest bull market in history – at least by one measure.2
While the last 10-plus years have seen some big ups and downs for the benchmark S&P 500, the index has never closed more than 20% below a recent peak in that span, meaning the current bull market is more than 10 years old.2
Ten years later (at the close on Friday, March 8, 2019), the S&P 500 had risen 305.5% from that low. The Dow had gained 288.7%.2
How about the Nasdaq Composite? 483.94%. (As you look at these impressive numbers, remember that past performance may not be indicative of future results.)4,5
Those gains did not come without turbulence, and stocks in no way turned into a “sure thing.” The risk inherent in the market is still substantial along with the potential for loss. The lesson this long bull market has taught is simply that the bad times in the stock market are worth enduring. Good times may replace those bad times more swiftly than anyone can anticipate.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - forbes.com/2010/03/06/march-bear-market-low-personal-finance-march-2009.html [3/6/10]
2 - thestreet.com/investing/stocks/bull-market-10th-anniversary-14891697 [3/10/19]
3 - tinyurl.com/yyhbtfw8 [4/2/19]
4 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=03%2F09%2F2009&x=0&y=0 [4/2/19]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F08%2F19&x=0&y=0 [4/2/19]
Do Your Investments Match Your Risk Tolerance?
When was the last time you looked at the content of your portfolio?
Provided by Rita Wilczek
From time to time, it is a good idea to review how your portfolio assets are allocated – how they are divided among asset classes.
At the inception of your investment strategy, your target asset allocations reflect your tolerance for risk. Over time, though, your portfolio may need adjustments to maintain those target allocations.
Since the financial markets are dynamic, the different investments in your portfolio will gain or lose value as different asset classes have good or bad years. When stocks outperform more conservative asset classes, the portion of your portfolio invested in equities grows more than the other portions.
To put it another way, the passage of time and the performance of the markets may subtly and slowly imbalance your portfolio.
If too large a percentage of your portfolio is held in stocks or stock funds, you may shoulder more investment risk than you want. To address that risk, your portfolio holdings can be realigned to respect the original (target) asset allocations.
A balanced portfolio is important. It would not be if one investment class always outperformed another – but in the ever-changing financial markets, there is no “always.” In certain market climates, investments with little or no correlation to the stock market become appealing. Some investors choose to maintain a significant cash position at all times, no matter how stocks fare.
Downside risk – the possibility of investments losing value – can particularly sting investors who are overly invested in momentum/expensive stocks. Historically, the average price/earnings ratio of the S&P 500 has been around 14. A stock with a dramatically higher P/E ratio may be particularly susceptible to downside risk.1
Underdiversification risk can also prove to be an Achilles heel. As a hypothetical example of this, say a retiree or pre-retiree invests too heavily in seven or eight stocks. If shares of even one of these firms plummet, that investor’s portfolio may be greatly impacted.1
Are you retired or retiring soon? If so, this is all the more reason to review and possibly adjust the investment mix in your portfolio. Consistent income and the growth of your invested assets will be among your priorities, and therein lies the appeal of a balanced investment approach, with the twin goals of managing risk and encouraging an adequate return.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - thebalance.com/normal-pe-ratio-stocks-2388545 [2/27/19]
Insurance When You’re Young and Single
Coverage can be a great comfort, even in youth.
Provided by Rita Wilczek
The transition to adulthood is an exciting new stage that marks true independence. You may have graduated from college, taken your first job, and even, rented your first apartment. With this new freedom comes real responsibilities, including protecting yourself from the financial risks that life presents.
Auto. Once you are no longer covered on your parents’ policy, you will need to find insurance coverage in your name. It can be expensive for a young driver, so consider shopping around for the best rates and learn the myriad of ways to reduce this cost, such as coverage and deductible elections, the type of car you own, and available discounts.
Renters. If you are moving into an apartment, you should consider renters insurance. You may not think you’ve accumulated much in value, but when you calculate the cost of replacing your computer, electronic equipment, HDTV, clothes, etc., it can total thousands of dollars. Renters insurance can be inexpensive. When shopping for a policy, ask about whether it includes liability coverage, which can protect you in the event you are sued by someone who is injured while in your apartment.1
Health. Health care coverage is frequently obtained through your employer. However, if your employer does not offer a health insurance program, you have two choices for obtaining coverage.
The first is to maintain coverage through your parents’ health insurance plan. Federal law permits parents to keep adult children on their plan up to age 26. This choice may be relatively inexpensive, so you may want to ask your parents to inquire what the monthly premium is to add you to their plan.
The second option is to purchase a policy, directly, either through a private insurer, the federal health insurance exchange (HealthCare.gov), or through a state exchange, if available in your state of residence.2
Disability. Your single most valuable asset is your future earning power. Your ability to work and earn an income is essential when it comes to your financial survival. Incurring a disability, even for a short period of time, can have substantial economic consequences, making disability insurance one of the most important insurance needs at this stage of life.
Life. Since a young, single adult typically does not have other people depending upon their ability to earn a living (e.g., children, dependent parents), some believe the need for life insurance is minimal.
However, due to a long life expectancy at this young age, life insurance coverage can be very inexpensive. You may want to consider obtaining some coverage to take advantage of low rates and good health, in advance of a time when you will have dependents.
Extended Care. Given limited financial resources, extended care insurance may be a low priority. Nevertheless, you may want to have a conversation with your parents about how extended-care insurance may protect their financial security in retirement.
Making these decisions signals that a young adult has achieved a new level of maturity and responsibility. While it may seem overwhelming at first, conversations with a trusted financial professional may assist you in finding coverage that both meets your needs and fits within your budget. It may turn out to be a decision that means a great deal to you in the years to come.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Citations.
1 - thebalance.com/best-rental-insurance-4158701 [9/20/2018]
2 - transamericacenterforhealthstudies.org/affordable-care-act/consumer-categories[12/13/2018]