Month: October 2019

If Money Were No Object, What Would You Do?

Posted on | by debrabrede

You may already be familiar with my retirement questions, the series of inquiries I use to identify my clients’ goals for life beyond work—as well as their hopes, dreams, and fears about it. With these queries, my goal is to custom-tailor a plan that works for them, one that is as emotionally satisfying as it is financially sustainable.

My questions run the gamut from practical to shoot-for-the-moon aspirational, and together, they provide a complete picture of what clients are looking for: a plan that will help them feel productive (a big issue for retirees), satisfied, and set to weather any financial circumstances that arise when they no longer have income from a regular job.

One of my favorite aspirational questions always gets an interesting response: If money were no object, what would you do?

Some people pledge that they’d buy their kids lofts in the most posh part of Manhattan with those imaginary dollars. Others ponder the possibility of fitting into a size two bathing suit, and the plastic surgery procedures necessary to make that happen. Still others wonder dreamily about the logistics of purchasing a 300-acre property upstate, complete with a bed and breakfast and working horse farm.

What’s the point of encouraging all of this wishful thinking? It’s actually two-fold: I get insight into the client’s biggest dreams, while they get a chance to ground themselves after traveling to the far end of their financial fantasies. Often, these questions help guide us toward an achievable goal that is somewhere in the middle, whether that’s contributing a set amount toward a down payment on a home for their children, investing in a little self care, or booking some riding lessons at the local stables.

With the aspirational version of their ideal retirement in mind, we can create powerful plan for long-term fulfillment.

Stock Market Cycles

What are Market Cycles and Why Do They Matter?

Posted on | by debrabrede

Do you like roller coasters? Whether the thought of climbing steep inclines only to plummet to new depths is thrilling or terrifying to you, I can tell you one thing: the average investor certainly doesn’t like those death-defying drops when it comes to the market. Just ask anyone who worked in the markets—or had money in them—during the global financial crisis of 2008, the tech bubble burst of 2000, or the “Black Monday” crash of 1987.

I can still hear those coaster-induced screams, not because the events themselves were particularly devastating—they weren’t (at least not for those of us who stayed in the markets and owned companies that were fundamentally sound)—but because they caused such hysteria. During those years, clients called me panicking on a daily basis. It was hard not to buy into their alarm, but I kept faith that we would ratchet our way back up.

Why? I understood market cycles. What is a market cycle, exactly? A period measured not by dates, but by market conditions. A cycle is considered complete, or “full,” when the market in question has gone from bull—a market in which prices are expected to rise—to bear, when those prices fall due to widespread investor pessimism, and back again to bull.

Although past performance is no guarantee of future results, I believe studying the history of the stock markets’ uptrends and declines can help one to better understand why staying invested for the long term can be beneficial.

Since the inception of the S&P 500 Index back in 1926, the market has gone through cycles, with average bull markets lasting 9.1 years and producing an average cumulative return of 476 percent, and bear markets averaging 1.4 years with loses totaling around 41 percent. [1] Yet with all these expansions and contractions, today we stand with a stock market valuation higher than it was when it started.

We may be on a roller coaster, but that roller coaster is on a mountain. There may be peaks and valleys along the way, but ultimately—at least to date—we’re still heading up.

Of course, successful investing requires an awareness of those peaks and valleys and careful analysis of opportunities. That is exactly what I do—and have done—every day of my working life, since 1985.

 

[1] Source: First Trust Advisors L.P, Morningstar. Returns from 1926-6/29/18. The S&P 500 index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. Investors cannot invest directly in an index. Index returns do not reflect any fees, expenses, or sales charges. These returns were the result of certain market factors and events, which may not be repeated in the future. Past performance is no guarantee of future results.