Being Smart with $$ - Eat Turkey and Invest in Turkey

This Thanksgiving, invest in Turkey. No, not the bird, the country. But not just Turkey, invest broadly across international markets. Investing internationally provides greater diversification and lower volatility to a portfolio. Shortsighted investors may point out that the US markets have outperformed international markets over a long period of time. But sectors perform cyclically and in many prior periods the opposite was true. Those who have shunned international markets have lost extra returns this year. One emerging markets international index fund, that has exposure to Turkey, has returned a whopping 36% year to date. Total international stock funds have returned about six percentage points more than the total US stock market funds so far this year. So while you’re eating turkey, consider investing in Turkey for the rest of the year and beyond. And have a HAPPY THANKSGIVING!

- Larry Pike, CFA, Client Priority Financial Advisors LLC

- www.clientpriority.com 

Being Smart With $$ -- Investment Fees Matter More Than You Think

Fees. Fees. Fees.  They will make you poor! Or at least less rich.  So many people pay too little attention to the effect of fees on their investment performance but it matters more than you think. If you lose just 1% to fees on a mutual fund investment over 20 years, you may end up with about 18% less money.  On a $100,000 investment, that 1% might cost you about $65,000 in lost earnings.  And you might think that paying a high management fee to own a certain fund will pay off.  However, Morningstar has studied this and found that the lower the management fee a U.S. stock fund had from 2010 to 2015, the greater its chance of outperforming its category and of not being shut down.  They found that the 20% of all U.S. stock funds with the lowest fees returned 3.4% more annually over that 5-year period than the 20% of funds with the highest fees. Let’s not calculate what that would amount to over 20 years.  It might make you cry.  “Fund Fees Predict Future Success or Failure” Morningstar May 5, 2016.

- Larry Pike, CFA, Client Priority Financial Advisors LLC

- www.clientpriority.com 

Being Smart With $$ -- Reacting to Predictions of Stock Market Crashes is a Bad Strategy

In early October, TheStreet.com headline shouted: “4 Reasons We Could Have Another October Stock Market Crash.”  Many investors know October claims ownership of well-known stock crashes in 1987, 1929 and others.  If you are the type to believe and react to every headline, you might have missed a 2.36% October gain in the stock market (S&P 500 index).  That’s a spectacular return if you realize that 12 months like that would give you a 32% annual return.  The actual return over the last 12 months is 21% which is still spectacular but you would have missed that too if you listened to last year’s doomsayers and they are always out there.  Can there be a crash that’s not in October?  Of course.  But predicting when or if it will come is great for headlines and not so good for your portfolio.  If your stock investments are for your long-term goals then you don’t need to predict a crash; you just need not to worry about it when or if it happens and know the market is likely to recover nicely over the years.  We all know people who have been on the sidelines for years waiting for the crash.  Now they need a pretty big crash just to get in where they could have 3 years ago.  And if a correction turns out to be 5% returns for several years instead of the higher historical average then they will continue to lick their deepening wounds.  Buying and holding and investing new cash regularly is how most successful investors achieve long-term wealth. Timing the market is not.

- Larry Pike, CFA, Client Priority Financial Advisors LLC

- www.clientpriority.com