Dear Clients and friends:
I would like to wish you a happy new year and a prosperous 2015.
The year that we now leave behind us was a positive one in the
financial markets. After a huge increase in stock prices in 2013, many feared
that 2014 could be a year where we would give back some of those returns. And
if you were someone who likes to time the market, you may have sold some or all
of your stocks at the beginning of last year. As it turns out, the
overall U.S. stock market returned 10.5% in 2014. Large stocks did better than
small stocks and high dividend payers outperformed those that don't pay out
much of their income. International stocks, were negative for the year by 7.7%.
REIT funds returned over 25% and bonds returned a respectable 2.9%. A model
portfolio for a family with school-aged kids returned approximately 7.5%
overall. Results for other portfolios with different risk
profiles would vary.
As briefly mentioned above, timing the market in an attempt to
take advantage of a sector that you believe will outperform, can be dangerous.
The most experienced stock market investors have a very questionable record in
timing the market. Those who reduced their stock positions at the beginning of
last year missed the strong performance in stocks. No one can predict how each
sector of the financial markets will perform in 2015 and last year's winners
may be next year's losers or they may again lead the pack. Therefore we must continue to maintain the portfolio
that is right for our personal circumstances. Maintaining a diversified
portfolio prevents the kind of catastrophe that would occur if your portfolio
was made up entirely of one market sector and that sector substantially
underperformed.
It is useful to periodically rebalance your portfolio such that
you make adjustments to maintain your target weights for each sector.
Rebalancing is generally recommended every 6 to 12 months except in the case of
large market moves where you might want to address this more frequently.
A change in your personal circumstances would be another reason to address your
financial plan sooner.
If you are someone who is still saving for a goal, you may note
that contribution limits have increased in many savings vehicles for 2015. New
limits are shown below:
401(k) $18,000401(k)
catch-up $6,000IRA and Roth
IRA $5,500
(unchanged)IRA and Roth IRA
catch-up $1,000
(unchanged)Income limit to contribute to a Roth IRA (married filing
jointly) $193,000(single) $131,000
I am available by phone or email anytime
if you have questions or require assistance so don't hesitate to contact
me. And remember that references are the greatest thank you I can
receive if you believe I have helped you.
Warm regards,
