Market Alert March 24th, 2019: Important: Please Read! We Are Buying. What To Expect.
We Are Buying. What to Expect.
We are excited to participate in the upward trend that we see has established itself and look forward to the potential that it offers.
We bought with a fourth of your equity allocation on Friday. It takes a few days for the trades to settle, but you will get the buying price for all trades as of Friday. Thankfully, Friday was significantly down making it a great day to buy, in our view!
Our schedule is to buy with another fourth a month from now; the third fourth a month after that; and the last fourth the month after that.
Please listen to Ken’s podcast on “The Market Goes Up 99% of the time so never sell: wrong!”
There are 4 main scenarios that could play themselves out in the coming months:
- The Equity Markets go straight up from here.
- The Equity Markets go straight down from here.
- The Equity Markets go down from here and then go up.
- The Equity Markets go up from here and then go down.
We have studied our strategy going back to the 1920s, and all four scenarios have happened in the past. Number three is the most likely event, according to our research, and the one that we believe will happen.
Let’s look at each scenario separately:
The Equity Markets go straight up from here. Of course, this is great in the long run since all of the buys will be lower than where the market is a year from now. However, it could bring the anxiety of “Why don’t we buy in faster? We are missing out!” or “The market has been going up so much, I don’t want to buy-in at such high levels.”
The Equity Markets go straight down from here. Since we are buying in gradually, this would be a good thing while we buy-in, but not so good in the long run since it would continue to go down after we are done buying. This scenario could bring with it multiple emotions. “Do we really want to buy while the market is going down? I prefer the comfort of buying in a rising market.” Or “I am glad the market is going down while we are buying because we are getting a lower price each time.”
The Equity Markets go down from here and then go up. This is the perfect scenario, as we do want to buy low and then see our buys turn into gains over time. This scenario, though, could bring with it the emotions of “The market has been going down for the last two months, I don’t want to buy in anymore!” or “The last two buys have lost me money! I am very uncomfortable!” or even “Why aren’t we buying in faster? The market has gone down. This is opportunity knocking!”
The Equity Markets go up from here and then go down. This would be the worst case scenario as we would have bought as the markets were rising and then they lapse into a bear market, and our buys were not good ones. This could bring on the emotions of “The strategy does not work!” “This is not what I signed up for!” or worse “Money Matters, you are fired!”
While it is human nature to experience some or all of the emotions described above, they all miss the point, and we want to disavow you of all of them before you experience any of them.
Keep in mind that our job is to worry about all of this stuff so that you don’t have to. Your job is to enjoy your second childhood without parental supervision!
But, if you insist on worrying, here is what we worry about so that you don’t have too.
Our goal is to protect you from losses that would cause you not to be able to retire, to have to un-retire or to have to cut way back on your standard of living while we wait for your money to build back up again. Achieving our goal comes with the possibility of missing out on returns or underperforming. We believe that missing out on returns or underperforming is not as bad as experiencing the pain that a bear market can inflict.
Since all investments have the potential for loss, you have to pick what you want, a conservative approach designed to make the losses that we do experience tolerable or one that maximizes returns but exposes you to larger risk. And no, you cannot have both!
As we always say, “We are not here to make you rich quick, we are here to help you not to become poor!”
By buying in gradually versus buying all in enables us to mitigate the downside in all of the scenarios except when the market goes straight up from here.
Let’s look at each one separately from a strategic standpoint:
The Equity Markets go straight up from here. We would have been better off buying in all at once, but we are still okay with buying over time since the market continued to rise after that.
The Equity Markets go straight down from here. By buying in gradually, each buy would be lower than the last. In this scenario, we may not make all of the buys as planned, but if we did, we would eventually reach a place where we would sell all and go back into protection mode.
The Equity Markets go down from here then go up. As described earlier, the best case scenario but scary to buy into a declining market.
The Equity Markets go up from here and then go down. This is the worst case scenario as our buys would result in losses when the market goes back down. Once again, we believe this to be the least likely, but we would reach our sell signal and then we would sell all and go back into protection mode.
In the “bad scenarios,” which our research shows are least likely to happen, we would experience losses. The losses would be stopped, however, as we would sell or stop buying when we reach our sell signal point.
No one wants to lose any money. However, we believe the losses would not cause you to have to delay your retirement nor would they unretire you.
The alternative, of course, is to have no strategy at all and just “buy and hold.”
The problem with “buy and hold,” in our opinion, is that a bad bear market could delay your retirement for years or cause you to have to go back to work to keep your standard of living. We saw this first hand in Y2K and 2008, as did many of you.
We believe that delaying your retirement or having to un-retire are unacceptable options.
As you can see, there are many considerations at play, and it is our job to guide you through it all. We do not want you to worry about any of this. Your Investment Committee has over 130 years of experience. We have been here before, and we are up to the task.
- Do you know if you have enough money to retire on?
- Do you have a plan for what to do when the next market crash comes?
- What are 5 strategies that you can use to reduce your income taxes?
- How do you plan for your retirement cash flow?
- What should you do to maximize your Social Security benefits?
- Are you diversified the way you should be?
Look at the chart below:
I would like to invite you to come to one of our seminars. They are designed for those of you who are retired or retiring soon, and they are free.
At the free retirement seminar we will answer these burning questions:
- How do I protect my retirement from the next market crash?
- How do I avoid three basic “pitfalls” of retirement distribution planning?
- Am I on track to be able to retire?
- When should I take Social Security? 62? 66? 70?
- Am I diversified the way I should be?
- How much can I afford to spend during my retirement?
- How can I fight inflation?
- How do I determine how much risk is appropriate for me?
- Do I take my pension or a lump?
- How do I avoid having 85% of my social security getting taxed?
- Should I rollover my 401(k)?
- How do I reduce my income taxes in the future?
- We Are Going Back In, Gradually
- Want To Retire Abroad? Three Things To Think About
- How To File For Social Security
- Market Is Up 99% Of The Time, So Never Sell: Wrong!
- Estate Tip: How To Pass On Digital Assets
We believe that the risk that we have today is different than anything we have had in history.
The hundreds of trillions of dollars of global debt put a significant strain on government’s ability to do anything about the next recession. In fact, we see all of this debt exacerbating the effects of any economic slowdown. The worst recessions that we have had around the world have mostly been the results of governments taking on too much debt.
It is our singular goal to keep our clients from becoming poor. Preserving the wealth that they have built is job number one for us. I encourage you to join the Money Matters family!
I believe that avoiding large losses is the single most important thing that we should be concerned about as investors.
Perhaps you were given a package by your employer. Perhaps you sold an asset and want to know how to properly invest the proceeds. Perhaps you inherited money and want to keep it safe and grow it if you can. Perhaps you just want a second opinion. These are all reasons for you to take advantage of all of the resources that we at Money Matters have to offer you.
We want to help you to achieve your retirement goals.
Thank you for subscribing to this newsletter. I hope it finds you and yours in good health and spirits.
Ken Moraif, CFP®, MBA