Financial literacy education
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Make yourself and future generations of retirement savers into “super savers”

April was Financial Literacy Month, which led to a flurry of articles about the retirement crisis in the U.S. One piece noted that the “average” retirement savings amount, paltry though it is, is often an overstated figure because it is the average (i.e. mean) rather than the mid-point (i.e. median) and therefore overstates the “average” savings level. It indicated that although the “average American” has about $200,000 in retirement savings, the median…

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Q4-2018 Quarterly Context Webinar
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Lessons from a flat tire – how to handle stock market volatility

Is recent market volatility making you nervous? Perspective could help you stay calm and on track. Your financial journey is a lot like a car trip. On your route from point A to point B, while driving wisely, it is normal to experience stoplights, curvy roads, bad weather, or other elements that slow you down. A few times in your life, you might hit a pothole or nail that causes…

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2019 IRS contribution limit updates means you can save more in your retirement plan

You can now save more in your retirement plan! See below for 2019 IRS contribution limit updates, and click the link for IRA account and other updates. 401(k), 403(b), 457 Plan deferral Limit: 2018: $18,500, 2019: $19,000 “Catch-up” Contribution >age 50: 2018: $6,000, 2019: $6,000 Defined Contribution Total Dollar Limit: 2018: $55,000, 2019: $56,000 Highly Compensated Employee definition: 2018: $120,000, 2019: $125,000 Click here for full IRS announcement of 2019…

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Now is a good time to learn the lessons from the Global Financial Crisis

As we hit the 10-year anniversary, there are lessons to learn from the economic challenges and 2nd worst market in history, and subsequent recovery, that began a decade ago. 10 years is long enough that some people don’t even remember this major financial event, while others feel like they are still recovering, given that the economy’s recovery has been gradual, even though the market’s recovery has been strong… maybe a…

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Q3-2018 Quarterly Context Webinar

What you should learn from the GFC (Global Financial Crisis) after 10 years. The economy is growing but with wobbles. How is the current market like the last major market rise? Patterns of how long the market rises and how much, vs. declines, can help you be a disciplined investor. Your focus should be different during accumulation vs. spending years. Market volatility creates tax savings opportunities, short and long-term. Learn…

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Interest rates are shifting and will impact you… maybe more than any other economic indicator.

The Federal Reserve Bank’s Open Market Committee adjusts rates, down to stimulate the economy when needed, and up control inflation and prevent the economy from overheating during times of growth. In the first several years after the Great Recession, people thought little about rates. The Fed’s target rate fell to 0% late in 2008 and stayed at 0% for 7 years. Such extended periods of low rates is highly uncommon,…

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Q2-2018 Quarterly Context Webinar
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Q2-2018 Market Review

Summer months are typically a quiet time for the markets. Recent events, however, may disrupt this tradition. Threats of escalating trade wars have cast a pall over equities, and numerous geopolitical uncertainties continue to push investors toward a more cautious stance. A desynchronization in global growth as well as a divergence in central banks’ monetary policies have contributed to U.S. dollar strength and wreaked havoc on emerging markets. Currencies of emerging…

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Q1-2018 Quarterly Context Webinar
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Current market volatility is an investor test, not a market test

After years of unusually low market volatility that hypnotized a large swath of investors into believing yet again that markets only rise, the market drops of the last 2 days are a healthy reminder that stock market fluctuations should be viewed as a normal part of investing. Don’t forget, as is the case with food, good nutrition isn’t always tasty, but is beneficial in the long run. Eat your Brussels sprouts! As disciplined institutional investor Warren Buffet wisely said a while back, “The stock market is a device to transfer wealth from the impatient to the patient.” So, the real question is… do you want to be in the panic (impatient) group? Or the profit (patient) group?

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Q4-2017 Quarterly Context Webinar
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Article library & oldies but goodies

News articles to help you make better financial decisions. Topics include investor behavior, smart financial choices, investor pitfalls to avoid, and other topics.

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Maybe spend more $ in early years of retirement

Good news… you may be able to spend more in the early years of retirement than you thought. Smart in-retirement spending approaches were always critical to not running out of money have always been important, but new studies on longevity and spending patterns of those in retirement shed new light on the subject. You spend most of your life saving for retirement, so making sure the money is spent wisely…

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Q4-2017/Year End Market Review

2017: A Year of Records Macroeconomic Environment Another record low in volatility, more record highs in global stock markets, mixed records in global temperatures, a record number of natural disasters in the U.S., and many records associated with President Trump. The VIX Index, a widely used measure of expected stock market volatility, fell more than 20% in 2017, reaching an all-time low in November. Stock markets hit a number of…

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Take action now to reduce the risk of identify theft

If you are reading this (or even if you are not!), it is likely that you were one of the 145 million Americans whose information was exposed in the Equifax data breach earlier this fall (announced by Equifax in September of 2017), given that 145 million represents a high percentage of all adults in the U.S.. Now that the dust has settled, if you have not already done so, consider…

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Q3-2017 Quarterly Context Webinar
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Q2-2017 Quarterly Context Webinar
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But why bother with a Bun?

Some time back, a fast food chain ran an advertising campaign featuring a study group of meat and cheese lovers.  In the ad, the facilitator explains company’s new burger, and one of the test attendees indicates that he’d rather only have the tastiest part of the meal when he answers “I like the meat and cheese part, but why a bun?” Investors also sometimes ask themselves “Why the bun?”, however the question…

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Q1-2017 Quarterly Context Webinar
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What is the right path to get there?

After 8 years of positive market returns and increased uncertainty in politics, should you be more worried about market fluctuation risk? Is it “different this time” and should you be more conservative as an investor? It is common to feel nervous and have questions questions at this point in a market cycle and when the Oval Office has changed hands. It may make sense to make a change if you…

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Q4-2016 Quarterly Context Webinar
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Want to improve your returns? Keep your finger off the button.

It’s a new year and president, and with that comes uncertainty and many opinions about the direction of the investment markets. What’s key to remember is that uncertainty is nothing new. Studies suggest that despite major political and economic events that can impact returns in unpredictable ways in the short-run, it’s better to keep stay away from the panic button if you want better long-term results. A recently updated Dalbar,…

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What do the new annual savings limits mean for you?

Below are the IRS updates for 2017, which are similar to 2016 due to low inflation. Read on for special opportunities to save more… 401(k), 403(b), 457 Plan deferral Limit: 2016: $18,000, 2017: $18,000 “Catch-up” Contribution >age 50: 2016: $6,000, 2017: $6,000 Defined Contribution Plan Total Dollar Limit: 2016: $53,000, 2017: $54,000 Highly Compensated Employee definition: 2016: $120,000, 2017: $120,000 Click here for full IRS announcement of 2017 limits Some…

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Q3-2016 Quarterly Context Webinar
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An age-based savings multiplier rule of thumb as a quick test

One retirement readiness rule of thumb: Have 1x your salary saved by age 30. What about other ages? …2x at age 35, 3x at 40, 4x at 45, 6x at 50, 7x at 55, 8x at 60, and 10x at 67. These are general rules of thumb, however, that vary according to when you plan to retire and other factors. Use the WealthStep free Planning/Saving advice engine to get advice…

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Uncertainty is an interesting beast

Life would be less interesting if we knew how everything would turn out in advance. However, the same factor of the unknown that makes investment markets nervous is what makes investing attractive in the long-run. Unpredictability can cause asset prices to drop, but is also indirectly what pushes prices higher when good news occurs and fear diminishes. Over the last year, surprises included continued slow global growth, the first interest…

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Noise gets more attention than silence, however what is quiet can sometimes be dangerous to ignore

Stock market volatility attracts a lot of attention in the news, which causes some people to believe that such fluctuations are the only retirement preparation risk. In reality, there are other risks that are worse. Here’s the lowdown… When scared investors reduce volatility risk (i.e. reduce or get out of stocks), other risks increase… inflation and longevity risk. Inflation risk is about rising prices, if your savings value isn’t also…

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What to make of “Brexit”

SUMMARY: The United Kingdom’s vote last week to leave the European Union has global significance, but it may take years to know the full impact. The U.K. is likely to feel long-term affects. In the short term, uncertainty about the degree of global ripple-effect makes investment markets nervous. Given tepid global economic growth, the medium-term stock market outlook that was already guarded before Brexit is a bit more so now,…

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Wait a minute… the new “Fiduciary Rule” is supposed to make all financial advisors put their clients’ best interests first, but has exceptions?

A few weeks ago, the Department of Labor finalized the new “Fiduciary Rule.” In concept it helps protect investors from abuse, but it has big gaps, through exceptions. Unfortunately the gaps are not easy to find, but could negate much of the intent of the new rule. As context, most people aren’t aware that investment advice companies fall into two groups: 1) A big group of companies, enormous and tiny,…

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Learn to like volatility

How many songs have you heard that include lyrics like “Here we go again” or “It happened again” or “I did it again”? There are many, because trials and tribulations in life are many. The best outcomes happen, however, when you push on through.

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When markets drop: take deep breaths, and don’t do anything

Given the recent increase in market volatility, the article below may be a helpful read. As a WealthStep client or follower, you may have heard these timeless ideas before in our letters, webinars, and blog / Facebook / Twitter posts (follow us to get helpful thoughts and reminders!).

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The Reality of Red Numbers

How often are monthly stock market returns negative? Is there a pattern within years or across years? How about the bond market? You may notice that short-term volatility is a fair price to pay… the longer the time period, the fewer the negative returns. In other words participation and patience pays. And, remember that inflation (i.e. purchasing power risk) is a bigger long-term risk than market volatility. Gain perspective from…

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Simple or Simplistic? Which gets you to financial independence?

Most people want to help keep their investment planning and lives simple, but they don’t want to risk their futures with overly simple guidance. This is a critical distinction, and those that understand it tend to have better outcomes. In this context “simple” should mean “easy and helpful.” Simplicity happens when you do the hard work of working and saving/investing enough, while objective experts do the hard and right work…

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Buyer beware – Proposed investor protections don’t actually protect much

True or false?: All financial firms and professionals are required to act in your best interest, right? Answer: FALSE. Many have conflicts of interest, and biased “advice” damages results… A recent White House Council of Economic Advisers analysis estimate showed that conflicts of interest hurt affected investor accounts by ~1% each year. This amounts to around $17 billion annually. And since it is mostly related to fees and costs, it…

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Doctrine of the Mean

When one asset class is outperforming another within a diversified portfolio, investors sometimes wonder why both are held. The recent US stock market vs. the weaker International market such an example. The non-US stock market’s (MSCI EAFE) 3-year annualized return was not far off long-term stock averages, but the US market’s (S&P 500) unusually high 3-year return of 17.9% made well-balanced investors envious of less diversified portfolios. During the financial…

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You choose: Fiduciary vs. suitability standards of care

There are two very different standards of care, when it comes to financial professionals: “Fiduciary” (registered investment advisors, regulated by the SEC/Securities & Exchange Commission) and “suitability” (brokers, “self-regulated”). Below is a condensed version of a Washington Post article that summarize it well: Fiduciaries have a much stricter duty and legal obligation than do those who operate under suitability rules. Investors rarely come out on top when a self-regulating entity…

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So You Think You’re a Risk-Taker?

Nothing is more important for investors than learning how much they can stand to lose. But nothing is harder to learn—before it’s too late. http://blogs.wsj.com/moneybeat/2014/10/24/so-you-think-youre-a-risk-taker/

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Will a Stock Market Correction Derail your Goal?

Corrections are more normal than often thought and should be inconsequential.  Bear markets, which are periods of more significant decline, should be surmountable if you have planned properly. Stock market “corrections,” defined as drops of 10% or more, are not more likely at the top of a market. Between the years 1900-2013, the Dow (DJIA) stock index dropped 10% or more about once a year.  Stocks do not maintain steady…

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The Reality of Red Numbers

What’s your guess as to how many months the stock market declines or rises each year? And in bad vs. good markets? Our yearly update of “The Reality of Red Numbers” shows you, and illustrates that market volatility is often a reasonable price to pay as part of a diversified portfolio, to help capture long-term positive returns… whereas inflation (purchasing power risk) is often a more harmful risk in the…

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Goin’ up, goin’ down… let it roll

“Goin’ up, goin’ down, goin’ up-down-down-up… any way you want, let it roll” (song lyrics). Volatility has been low in the past few years. As measured by the VIX volatility index, market fluctuations are at the lowest level since before the global financial crisis. That doesn’t mean high volatility is immediately around the corner, but it is important to remember that smooth markets are not the norm. All investors should…

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WealthStep Update

The Advisory Group of San Francisco, the company that operates WealthStep, was recently ranked in FT Top 300 Registered Investment Advisors, in Financial Times 6/2014 study.

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Quarterly Thoughts – Q1 2014

Are there clear patterns of investment market returns over time?  How does a “balanced” portfolio compare to individual asset classes over time?  Our chart entitled “The Periodic Table of Investment Returns – A Case for Diversification Amid Uncertainty” is a colorful illustration that addresses these questions. People are not naturally wired for investing.  Without discipline, it is human nature to make mental errors, often due to “recency bias” and the…

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Quarterly Thoughts – Q4 2013

Will a disciplined investment process improve your health?  Recent research says yes.  Stress caused by dramatic market movements, the financial press, and investors’ common behavioral mistakes can make people feel queasy… or worse. A March 2013 study by the University of California at San Diego found that hospitalizations rise on days when stock market prices fall. Another study published in the American Journal of Cardiology showed a significant correlation between…

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Quarterly Thoughts – Q3 2013

Consider focusing where you can make an impact, in terms of your life goals and financial goals. The simplicity of this diagram is profound.  The world around us is complex and full of “noise,” both statistical and theatrical (e.g. TV news, etc.).  The senses are bombarded with eye and ear-catching attempts to grab your attention.  The challenge is to remain focused on what counts. Insufficient focus leads to distraction and…

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Quarterly Thoughts – Q2 2013

In investing, “normal” is an elusive idea.  Long-term average returns are relevant for planning, but rarely does a stock market calendar year return fall within a range of 2 percentage points around the average.  If “normal” does exist in the stock and bond markets, it can be loosely defined as a predictably unpredictable sequence of short-term economic events, followed by investor over-reaction and the ensuing volatile returns in the market….

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Quarterly Thoughts – Q1 2013

Market Volatility is the norm, not the exception.  Yearly, we provide an updated version of the enclosed Periodic Table of Investment Returns.  Given the recent global financial crisis and partial recovery market experience, the table is particularly timely, as it provides a broader perspective.  This chart is a powerful visual demonstration of the unpredictability of investment returns across major asset classes, and indirectly illustrates the importance of diversification, discipline, rebalancing…

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Quarterly Thoughts – Q4 2012

Despite the sluggish economy and the general perception that there has been limited progress after the global financial crisis, most stock markets rose 16% to 20% for the year, some market indices are now recording new highs, and the current U.S. stock market recovery, adjusted for inflation, is on track to be the fastest recovery amongst those that followed the four worst market crashes of all time.  While this may…

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Year-end 2012

Year-end is often a time of reflection and gratitude.  Recent events make that difficult, but not impossible… The Sandy Hook tragedy makes our hearts ache.  But, our hearts will not break, having seen the overwhelming response to the victims’ families and the possibility of the positive changes which may result from the experience.  WealthStep’s mission is to influence and facilitate positive changes in the lives of our clients and in…

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Quarterly Thoughts – Q3 2012

What does “safe” mean?  When driving car or playing baseball, the answer is generally clear.  When investing, the answer is less obvious.  To get where you want to go financially, it is critical to properly frame the problem, by asking the right questions: safe “from what risk?” and “when?”  Safe from volatility risk?  Or interest rate risk?  If so, at the expense of inflation risk (i.e. purchasing power)? Longevity risk…

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Quarterly Thoughts – Q2 2012

Are you in the panic group or the profit group? Often times, the discomfort of sea or motion sickness can be avoided or reduced by keeping one’s eyes on the horizon. Similarly, keeping a long-term focus can reduce “emotion sickness” of the investor kind. Anticipating and managing such discomfort is paramount, because an investor’s ability to focus on the goal rather than on short-term disturbances can impact the timing and…

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Quarterly Thoughts – Q1 2012

Are you taking the right or wrong risks? Inflation is one of the various and worst risks investors must consider in the long-run. Inflation is currently lower than historical averages due, in part, to the slow economic recovery. However, the prices of goods and services tend, eventually, to rise after a period of eased or stimulative government “monetary policy,” such as we have seen in recent years. Regardless of short-term…

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Quarterly Thoughts – Q4 2011

Instincts are sometimes critical for survival. If you experience fear of physical danger, your instinct may be what saves your life or the life of others. Before you’ve had time to think, fear triggers an automatic response that may cause you to run, duck, jump or fight. Unfortunately, an increasing number of behavioral finance studies show that instinct and investing often mix poorly. The human brain often responds to concern…

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Quarterly Thoughts – Q3 2011

By the first half of 2011, after a post-crash jump in investment prices, many disciplined investors felt a material level of financial and emotional recovery from the 2007-2009 credit crisis market. The third quarter of 2011, however, was a reminder that the bumpy road to full recovery is not yet over, as the world slipped on Greece (how about that pun!?). Small economies can sometimes be the tail that wags…

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Quarterly Thoughts – Q2 2011

Who is on your side? Insightfully, when asked what his profession was in the 1979 film “Manhattan”, Woody Allen’s character responded, “I’m a stock broker. My job is to invest people’s money until it is all gone… I’m frequently wrong, but never uncertain.” Sadly, most investors still aren’t clear about the difference between securities salespeople, i.e. “brokers” or commission-based or fee-based “advisors” (i.e. accepts fees AND commissions, unlike fee-only advisors),…

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Quarterly Thoughts – Q1 2011

“The only certainty is that nothing is certain” ~ Pliny the Elder, First century Roman. Despite major unrest in parts of Northern Africa and the Middle East, a massive earthquake, the subsequent tsunami and partial nuclear meltdown in Japan, renewed sovereign debt concerns in Europe, and continuing inflationary pressures in certain emerging market countries, the global economic recovery pushed on. If recent events teach us all anything, it is that…

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Year-end 2010

To start the new year, let’s take a look back at 2010 from an investment perspective. For the second year in a row, stock markets rose more than the historical averages. Bonds were also positive for the year. Discipline was again important… 8 months into the year the S&P 500 Index was down 5.8%, but later surged to a 15.1% gain for the year, recouping all of its losses since…

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Quarterly Thoughts – Q3 2010

Maintaining reasonable expectations, embracing the sometimes uncomfortable reality of incertitude, and living within one’s means, are fundamental to defining and achieving realistic goals. Referring to unpredictability, Benjamin Franklin once said that “nothing can be said to be certain except for death and taxes.” Behavior finance research increasingly suggests that another near-certainty is that the human brain is wired to make investment mistakes if not properly trained. WealthStep helps educate clients…

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Quarterly Thoughts – Q2 2010

After feeling some recovery related relief after the market bottom in March, 2009, the bumpy last few months are making some investors nervous. Such recovery related dips, however, are not inconsistent with previous strong markets. There have been 11 bull markets since 1945, and during those markets there was a correction of 10% on average, in the 11th month of those recovery markets (this recent correction occurred in the 14th…

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Quarterly Thoughts – Q1 2010

Out of the ashes rises the Phoenix – almost. The “ashes” of the financial crisis we have experienced could have given rise to a new “financial Phoenix”: a total standard of fiduciary care and responsibility by the financial industry. It almost happened when legislation was proposed which would have created such a standard. But in the end, it was defeated by powerful, conflicted financial institutions: brokerage firms and the insurance…

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Quarterly Thoughts – Q4 2009

“The years teach much which the days never know” – Ralph Waldo Emerson. In the past 18 months we have witnessed the worst crisis for the global financial system since the Great Depression, the steepest stock market decline since World War II, the biggest cut in dividend payments since the 1930s, and the fastest stock market surge in 70 years. Many of the “talking heads” incorrectly predicted the beginning of…

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Year-end 2009

On December 31st, we will have completed the first decade of this century and millennium. Think about what we have all experienced in the last 10 years: Y2K without systems collapses; the end of one of the greatest bull markets, two of the four worst markets in history; terrorist attacks on our soil; war in Iraq and Afghanistan; oil prices going through the roof; the acceleration of global warming; the…

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Quarterly Thoughts – Q3 2009

During this Global Financial Crisis or “Great Recession,” the foundations of Wall Street and the global financial system were shaken by the collapse of Lehman Brothers, the vanishing of Merrill Lynch as an independent entity, and the take-over of AIG by the government, amongst other events. Roughly six months ago, on March 9th when the Dow Jones Industrial closed at 6,547, the press and average investor felt as if the…

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Quarterly Thoughts – Q2 2009

In recent quarters, at the height of investor concern about global economic and market malaise, we reminded you that the market often rebounds significantly after dramatic declines, and that market recoveries usually begin before economies heal. The results of the Second Quarter of 2009 bear this out, as part of what we believe is the beginning of the recovery. For example, the S&P 500 Index and MSCI Emerging Markets Index…

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Quarterly Thoughts – Q1 2009

That’s one “mean reversion!” If historical 10-year average cycles are any predictor, now is not the time to abandon long-term strategies (see chart). The response to excess in the form of the dot-com-bomb and the credit-crunch-chaos caused the last 10 years to be one of the worst in U.S. history. However, notice that weak 10-year periods always overshoot the mean, and are often followed by strong recoveries (i.e. your friend,…

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Quarterly Thoughts – Q4 2008

The Chinese character for “crisis” is actually a composite of two other characters: “danger” and “opportunity.” Current financial markets are volatile, but also provide opportunity. By rebalancing portfolios, investors “buy low” and “sell high” systematically. At a time when stocks are “on sale,” by not selling, we are in effect “buying” at possibly bargain prices. Discipline pays off over the long haul.

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Year-end 2008

It has been said that pilots are paid for “takeoffs” and “landings.” The recent “Miracle on the Hudson” is a reminder of the value of proper process and guidance during freak-events. A flock of birds flew into a jetliner’s engines rendering the engines useless, but a pilot with a lifetime focus on risk management successfully landed the plane in the Hudson River. It was a frightening, and there were minor…

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Quarterly Thoughts – Q3 2008

Markets continue to be difficult. However, panic can damage long-term profit. As Burton G. Malkiel, professor of economics at Princeton University wrote recently in The Wall Street Journal, “Just because stock markets have panicked, investors should not. A century of investing experience, as well as insights from the field of behavioral finance, suggests that investors who bailout of equities during times like these are almost always making the wrong decision.”…

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Quarterly Thoughts – Q2 2008

The Bear market has officially arrived, as measured by S&P 500 dropping 20% from its peak. There have been 31 bear markets since 1900, averaging one every 3 or 4 years. According to Standard and Poor’s Equity Research, we have experienced nine bear markets since 1956. They have varied in magnitude from the decline of 20% in 1990 to the drop of 48% in 1973-1974 to the plunge of 49%…

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Quarterly Thoughts – Q1 2008

The credit/liquidity crunch and housing market decline continues… daily volatility is higher than average. The Reality of Red Numbers is a helpful reminder of how negative markets are more common and frequent than many people tend or like to remember. During uncertain times like these, it is more important than ever to stick with your long term investment strategy rather than react emotionally to the day-to-day market fluctuations. Resorting to…

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Quarterly Thoughts – Q4 2007

Market volatility is the norm, not the exception. Clear patterns seem to appear… and then disappear. The “Periodic Table of Investment Returns” illustrates this well, and a strategic approach to investing ensures that investors benefit from the best returning asset classes, while avoiding over-exposure to the worst performing asset classes. The key message is that a diversified portfolio approach will combine many or all of these and other asset classes (as…

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Year-end 2007

This is the time of the year that we honor and express our gratitude for our clients and friends. We do so by making donations to worthwhile causes that have directly and indirectly touched our lives or those of our clients. This year we have contributed to: • American Cancer Society • American Heart Association • Kaiser Permanente Hospice Program • Michael J. Fox Foundation for Parkinson’s Research • National…

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Quarterly Thoughts – Q3 2007

A process for best-thinking. WealthStep’s purpose is to positively impact lives and the goal achievement of our Clients, with a special focus on people who can’t access or don’t yet want a full-service advisor. To keep our clients’ lives simpler, we conduct a broad set of investment research and monitoring “under the hood” on your behalf. Just to name a few elements of our process, we oversee your accounts, monitor…

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Quarterly Thoughts – Q2 2007

Unfortunately, the vast majority of investors around the world are “served” by firms that don’t put their clients’ interests first… and 74% of investors are not even aware of the conflicts affecting them, nor the negative impact on their goals. WealthStep is proud to always place our Clients’ interests first. In 1991, WealthStep’s parent company became one of the first firms in the US to be a fee-only advisor. A…

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Quarterly Thoughts – Q1 2007

Recent volatility has made some investors nervous. However, the recent Dalbar study update is a reminder of the long-term opportunity cost of emotional investing: The S&P 500 Index’s average annualized return over the last 20 years was 11.9%, while the average equity mutual fund investor’s return was just 3.9%. This equates to a loss of 8% per year over 20 years, due to emotional investing, and illustrates the value of…

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