When we reminisce and think of some of your worst days it would be natural to assume it was sometime during the Great Depression. Believe it or not the worst drop in stock market history (at least percentage wise) was not in 1929 but rather on October 19, 1987.
There were a number of issues underneath the surface that led to that bloodbath of a day but what amplified things was the early practice of program trading. Computers were programmed to execute trades after being triggered by certain conditions and this literally made human traders almost worthless as automation took over!
Two years ago, on the 30th anniversary of Black Monday, we wrote an article and calculated what a drop would be in today’s stock market. Click here to check it out. On that day it would have been equivalent to about a -5,094 points drop in the Dow Jones Industrial Average. If it happened this coming Monday…we would see the Dow Jones go from about 26,965 to 21,033 for a drop of -5,932 points.
Are you ready and what would you do? How is your current portfolio positioned in the event of something even half of that type of drop? We’re not trying to be “doom and gloom” financial advisors but we’re also not so oblivious or positive that we’re “running East in search of a sunset”.
All this being said, get your plan in place now and prepare yourself for such an event. Even if you just let your mind get in front of it and don’t make any portfolio changes, your emotions will at least be more in check. History and reality tells us, however, that most people will read this and not prepare any differently.
One thing any of our readers will know if that we don’t pretend that we (or anyone) owns a crystal ball. The only thing we can promise you about tomorrow is that the day ends in the letter “y”.
One other thing that we know will happen…God willing…is that you will eventually retire or be 65 and eligible for Medicare. In advance of National Medicare Education Week we are doing two things:
(1) We’re sharing this article written by Steven Stasioski and,
(2) We’re happy to announce a free educational event where we’ll be addressing the ins and outs of Medicare. On October 17, 2019 at 6:30pm you can join Matt Pixa from My Portfolio Guide and Steven Stasioski from SCS Tax & Insurance Services at the Seal Beach Yacht Club. Bring your appetite and questions for a great evening of education and camaraderie. RSVP via email at email@example.com or call (562)799-5595.
We normally pen all of our articles (letters) to you but in this case the work was already done. This one has nothing to do with the stock market or economy but everything to do with your hard earned money being threatened by another scam.
Scams are nothing new but they sure seem to be getting more prevalent and slicker by the day. As you’ll note from the chart below the number of scams are predominantly centered around Social Security and that trend is on the rise.
Click here to read an article written by Michelle Singletary in the Washington Post. In the timely article she includes a helpful list and some links that serve as critical reminders of what to be aware of out there.
Chalk it up to the “dog days of summer” but we haven’t written a letter to you in a while. Perhaps this is in part to the wild ride you’ve sent investors on since the whipsaw action and insane volatility we saw this past December. For those of us with short-term memory issues, the year ended in brutal fashion with the worst December in 80 years. If you sold out of your investments, threw in the towel and fell prey to your emotions, you then missed the best January the stock market has seen in 80 years.
If you still haven’t paid much attention then perhaps the opening of this past week also hasn’t phased you…or should it?! Continue reading →
Has your alma mater or favorite team already been bounced from the NCAA basketball tournament? My Portfolio Guide can’t change that fact but we can offer you a fresh chance with our annual spin on March Madness. For the ninth year in a row we are rolling out our unique way to share investment themes and overall thoughts on the stock market.
We’re proud to say that My Portfolio Guide was the first financial advisory firm to publish a March Madness investing tournament where we share our picks and match them up against each other! We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.
The most boilerplate of portfolios has won out by riding the safe bet over the past few years. This is akin to the March Madness office pool where your coworker, who knows nothing about sports and couldn’t differentiate between a basketball and a football, wins the whole pool of money by simply picking the highest seed in each bracket. What we mean by this with regards to investment asset classes is that since 2013 the Large Cap asset class has been the easy money pick. If you had a decently diversified portfolio (which by design should include exposure to International and Emerging Markets), you lost to the boilerplate and simpleton portfolio that is mainly weighted towards Large Cap. Continue reading →
Over the past couple of months we’ve had all eyes on you and to state the obvious it’s been a wild ride! With all the recent volatility, the risks (and rewards) of the stock market were on clear display but today we switch gears to a different asset class and share some insight from our friend and guest author, Mr. Brian Chou, Esq.
Owning investment real estate can be a very rewarding and profitable experience, but it can also be a huge headache and a drain on resources. I remember when I purchased my first investment property several years ago, my head was filled with conflicting images of myself sunbathing on my private island and lying penniless in a gutter. The possibilities and the liabilities seemed endless. Continue reading →
Since 1950 you (the market) have risen an average of +1.4% over the last five trading days of the year. We typically see some tax loss selling in the early part of the month and then a positive finish to the year. Over the past 45 years, 34 of them have helped make this seasonal phenomenon seem real but this year is looking like Santa will bring a massive lump of coal instead of a rally.
While most Decembers in general are positive, this one so far has literally been the worst since 1931. It actually goes beyond just a bad month that is normally positive; as you can see from the graphic we put together below this market has been struggling for the entire fourth quarter.
Large Caps, as measured by the S&P 500, are very close to touching bear market levels. Whether we need to officially hit the -20% (official bear market definition) or not shouldn’t matter; it’s flat out dismal out there. Notice how both Small and Mid Caps have already reached bear market levels. Even though bonds have not had a great year they have at least mitigated some damage for those who have exposure to the asset class.
All that said, there has been very few places to hide and the fear levels are mounting. If you don’t have any alternatives or bond exposure in your portfolio you are basically at the will of the market and will have to either throw in the towel or ride it out. Those that do have an allocation with exposure to other asset classes outside of stocks have options.
We recently wrote a rough sketch on how we would approach portfolios if this indeed turned into a bear market. Many investors will fold up and do the worst thing you can do; sell and cement losses with no strategy aside from quitting. Our goal is not to “throw good money after bad” and keep buying into a market that is getting slaughtered but rather tactically take advantage of asset classes that are more resilient than equities.
Going back to our grid above…let us ask you a question:
What should you buy and what should you sell?
Our short answer is that we will gradually sell some alternative assets (not listed in the above grid but mentioned in this blog many times) and about 5% of our bond exposure. From there we plan to first nibble at Small Caps and the Mid Caps as those have been hit the hardest the past three months.
We’ll update our readers and clients more later but just because Santa didn’t delivery a rally this year doesn’t mean the stock market is broken forever; it’s merely giving you an opportunity to do something different than you did last time.