Being Smart With $$ -- It's Risky to be in Stocks & Risky Not to be.

The stock market is risky.  It’s risky to be in it and it’s risky not to be in it.  We all know what can happen in one bad year in the stock market.  But what happens over the long term if you play it too safe? An Ibbotson Associates study reported by Fidelity pointed out the bad news to those who avoid all risk. Over an average 30-year period going back to 1926, a $10,000 investment in safe, short-term assets would have grown to just over $27,000.  But if the same $10,000 were invested in stocks, it would have grown to more than $175,000.  That’s quite a penalty for playing it safe.  But what’s more is that if you were unlucky and picked the WORST 30-year period for stocks, you still would have seen your money grow to over $95,000.   Of course, past performance is no guaranty of future results and money you need in the next few years may be best kept out of stocks as you don’t have time to wait out the volatility.  But history has been unkind to those who play it too safe.  After all, consider that candy bars and houses double or triple (or more) in price every 30 years and then you’ll realize why you need those higher returns.

https://www.fidelity.com/viewpoints/financial-basics/guide-to-401k

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com 

Being Smart with $$ -- Jack Bogle has Died, the Man Who Helped Investors Lower Fees

Vanguard founder Jack Bogle has died. 

“A lot of Wall Street is really devoted to charging a lot for nothing and Bogle charged nothing to accomplish a huge amount.” (Warren Buffet speaking to Becky Quick at CNBC.)  Jack Bogle “introduced the first index mutual fund for individual investors” and “drove down costs across the mutual fund industry.” (Vanguard.com 1/16/19.)  “Fees matter more than most people think and Jack Bogle gave individual investors a way to lower their fees.  The less an investor gives away in fees, the more their own money is working for them.” (Larry Pike, now.)

https://investornews.vanguard/a-look-back-at-the-life-of-vanguards-founder/

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com
Blog: clientpriority.blogspot.com

Being Smart with $$ -- Isn't the Stock Market Risky Enough?

2018 reminds us that some years you make money in stocks but some years you lose it.  In either case, you want to make as much as you can and not lose more than necessary.  Many think that buying the star mutual fund of the last few years gives you a better a chance of making money in up years and losing less in down years.  But often the opposite is true.  When you buy a market-tracking index fund instead of an actively-managed fund, you are sure to almost match market returns every year. When you buy an actively-managed fund, you don’t know what you’ll get.  Maybe you want exposure to Europe and are choosing between Vanguard’s European Stock Index Fund and Janus Henderson’s European Focus Fund.  Three years ago, you may have noticed Janus’s strong performance over the prior 3 years versus the Vanguard fund and paid their 5.75% sales commission to buy this fund. But unfortunately you would have paid the price for learning that past performance often doesn’t carry into the future.  The Janus fund went on to severely underperform the unmanaged, market-tracking Vanguard index fund over the next 3 years.  In fact, the performance was so bad that even including the great years the Janus fund had from 2013 to 2015, the total 6-year performance of the Janus fund was far worse than the Vanguard index fund.  This doesn’t even include the commission paid to buy it.  What is the lesson?  Chasing strong past performers is often a losing strategy and buying low-cost, market-tracking index funds lets you match a market benchmark and in the long run that can work out quite well. Isn’t the stock market risky enough without the added risk that your fund might trail the market itself?

Larry Pike, CFA

Client Priority Financial Advisors LLC
www.clientpriority.com