Black Monday Revisited?

Dear Mr. Market:Unknown

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.

Click here to see what happened on that day, which is now known as Black Monday.

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.

PS- Don’t be “most people”!

 

Learn the ABCDs of Medicare!

Dear Mr. Market:Understanding Medicare: The ABCDs

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 matt@myportfolioguide.com or call (562)799-5595.

Now…on to the article! Continue reading

Social Security Scam Alert

Dear Mr. Market:Scam Alert

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.Top Government Imposters

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.

Have a great weekend and stay alert!

 

What to do if the Stock Market Correction turns into a Bear Market?

Dear Mr. Market:

We typically write you letters about your volatile actions and the erratic behavior you bestow upon us as investors. Many of our letters also try to put certain economic events into perspective so that people don’t let your wild stock market swings force them into making bad decisions. All that said, it’s come to our attention that we can finally roll out the answer to a question that is not always obvious:

What should an investor do if a standard stock market correction turns into a bear market? shutterstock_262478570

First off, let’s revisit the basic definition of a correction versus an official bear market. Click here for an article we wrote during the last correction in February, which incidentally at the time felt like the end of the bull market had finally come. Although the market sold off almost -10% in a short span, it clearly came back to reach record highs until October came around.

So…can we now apply the four most dangerous words in investing? Continue reading

Top 3 “Less is More” Hurricane Florence Stocks

Dear Mr. Market:Ambulance-Chasers

We don’t make it a regular practice to be ambulance chasers every time there is a tragedy or natural disaster. That being said, almost every major event (whether it’s considered good or bad) can create an opportunity for your investment portfolio.

Conversely, the old adage of “less is more”, could certainly apply here. We’re not simpletons just for the sake of it but in general the ‘less is more’ approach can greatly benefit your finances. Think about it…and if you haven’t already, we’ll spell out several major ways that having less of something will benefit your wallet: Continue reading

Making Financial Decisions After the Loss of a Spouse

Man's Hand Resting On HeadstoneDear Mr. Market:

Our letters to you typically center around the stock market, the economy, and related investment topics. At the end of the day, however, what is wealth (the accumulation, growth, and preservation of it) all really for? That answer is different for everyone but from our experience in meeting with thousands of investors ….it means nothing without family. Losing a loved one is always painful but when it’s your spouse there are also several financial issues that arise and knowing how to navigate is critical.

The following article is written by a guest contributor, Lucille Rosetti (see credits at the end):  Continue reading

Happy (Financial) Independence Day!

Dear Mr. Market:th-21

Apologies in advance for our clickbait headline. We usually aim to talk financial shop in our letters to you…but today is not about the stock market. Today, July 4th, is about independence, freedom, and the greatest nation on earth….the United States of America.

Lately the news headlines have been on an absolute overload of division and finger pointing. Truth be told..we’re absolutely tired and fed up with it. Watching and reading almost all sources of media simply takes its toll on you whether you realize it or not. As it relates to finance it has forced the untrained and emotional investor to make poor decisions. To every person who said I’m 100% out or in the stock market because of [insert political name/party]…you’re part of the problem. Holding this mindset is not using your brain as one may initially think but rather allowing another side of emotion and bias to drive your decision making process.  Continue reading

What is “long-term investing” anyway?

Dear Mr. Market:th-19

Why is the number 15 important for us to share with you today? In our opinion it’s because everyone seems to have a different idea of what “long-term” investing means. The notion that investors should think long-term is fine, and fairly generic advice, but that time frame has never been concretely defined; until now!
My Portfolio Guide defines long-term as being able to invest for at least a 15 year time horizon.
Using our definition even at retirement you could definitely be considered a “long-term investor”. Granted, you may be closer to needing to live on a fixed income or simply not have the stomach for the ups and downs of the stock market, but by our definition you are a long-term investor.
The average person is living longer so if you hung up the work boots at age 65, for example, going out 15 years puts you at age 80. Assuming you need investment funds to last at least to that age it would be wise to have a decent portion allocated towards growth investments. Putting your investments into bonds, CDs, or cash is a losing proposition once you factor in taxes and the silent and ever-growing killer of inflation.
 
168036_600Look…we get it…the stock market can make you lose your lunch. The roller coaster analogies are plentiful and with a 24/7 news cycle it seems like the slightest hiccup can create a bloodbath on Wall Street.  All that being said, the odds of the stock market being positive over time are overwhelmingly in your favor and it’s still the place to be if you want to grow your wealth. Over one-year periods, between 1926 and 1997, Ibbotson found that stock returns were positive in 52 out of 72 years, or roughly three-quarters of the time. Even so there is obvious risk and volatility with the best year having stocks return +54% and in the worst -43%.
 
But now let’s turn to longer periods. Ibbotson looked at five-year rolling cycles over the same era (1926-30, 1927-31, etc.). Out of 68 separate, overlapping periods, stock returns were positive 61 times which works out to be almost 90% of the time! Over 15-year rolling periods (there were 58 of them) stock returns were positive every time.
Since 1926, the stock market – as measured by the S&P 500 with dividends reinvested, has never had a 15-year rolling calendar period with a loss. If that fact doesn’t register…please read it again. Never once in history has the stock market lost money over a 15 year period. The longer your time horizon the more likely it is that you’ll make money in a diversified stock portfolio. 
One of the reasons financial advisors use other instruments in a portfolio outside of stocks is to diversify; that is also a nice way of saying it’s because they know you will likely be an emotional train wreck when volatility enters the arena. If there was a two horse race and we had to bank our entire livelihood on either the Bond horse or the Stock horse…it is without question which we would choose.
Furthermore, imagine if you could only open your investment account statements once every 15 years? Not only would you most likely be a less stressed and more successful investor, but the odds are substantial that you would have positive returns no matter what happened in the world.

Happy Halloween: What Costume Is Your Financial Advisor Wearing?

751271-13517090229985876-Matthew-Pixa

Dear Mr. Market:

Tonight is Game 6 of the World Series but it’s also Halloween. What are your plans? Will you be glued to the television or handing out candy to little ghosts and goblins? Since Mr. Market is a one trick pony and mainly wants to talk about the stock market, we’re sharing an article that was written five years ago on Halloween night. Enjoy!  Continue reading