Articles on Wealth Management Topics

Despite the confidence exuded by the talking heads on financial news networks like CNBC and Bloomberg TV, it's always a tenuous business to try to assign big stock market moves (down or up) to one specific root cause. And frankly it's not a particularly productive exercise to try to do so, other than for the benefit of TV ratings. That being said, in my humble opinion, while the coronavirus was certainly the catalyst for, and is still an ongoing contributing factor to, this stock market correction or bear market, there are several other factors at work:

The most widely-followed U.S. stock market indices now all sit at or near record highs. One of the factors often given credit for our stock market's resilient performance is the recent strength in economic indicators. But should a strong economy lead us to believe that the outlook for future stock market returns is rosy? The indisputable answer is, surprisingly, "No".

Financial advisors vary widely in the business models in which they operate and in the standards of care that they owe to clients. These factors determine the quality of advice provided, and of products recommended, by any given financial advisor as much as his/her education, experience, and professional designations.

Now there are almost 1800 ETF's being traded in the U.S., a remarkable number considering that there are less than 4000 companies listed on exchanges here. To distinguish themselves from the competition and to attract investment assets, these fund sponsors have stopped at nothing to slice and dice the financial markets in innovative, and in many cases just plain silly, ways.

In the last installment of Articles on Wealth Management Topics, we discussed academic research on different ways to estimate the magnitude of future stock market returns. As a refresher, the worst of the ways studied was to extrapolate future returns from past returns. Nearly as ineffective is to base estimates of future returns on surveys of individual and institutional investors.

Returns in financial markets are often cyclical. That is, multi-year periods during which asset classes or investing styles or mutual fund sectors succeed in generating above-average returns are usually followed by multi-year periods of disappointing returns, and vice versa. Since this market behavior is a key tenet on which our contrarian investment philosophy rests, let's explore the academic research supporting it and the ramifications for successful long-term investing.

One of the major factors to consider when deciding whether to rollover a retirement plan account to an IRA is investment flexibility. An IRA typically allows its owner almost unlimited investment flexibility. In contrast, a 401k, 403b or 457 retirement plan account-holder is constrained to choose from among the menu of investment options made available by the plan's sponsor and service provider.

Target-date mutual funds have been attracting more and more assets during the last decade, primarily as a result of their burgeoning use in 401k and 403b plans. Plan sponsors and participants alike are drawn to the simplicity of TDF's, but as is often the case, the easy solution is not the best one. The weaknesses of target-date funds stem from three words: lack of customization.

If you rely on the media, and particularly the local media, for your coverage of the stock market, you will find that the Dow Jones Industrial Average (DJIA) is the most oft-quoted measure of how the stock market performed on a given day. And yet most stock market professionals - portfolio managers, analysts, strategists and the like - will refer to the S&P 500 Index instead of the DJIA as their preferred yardstick of market performance. Why is this?

The decision as to whether or not to rollover a retirement plan account to an IRA should be based on more factors than just the associated mutual fund management expenses. On its website, the Dept. of Labor provides guidance to retirement plan participants, i.e. employees, on how to evaluate the fees and expenses associated with their plan: "... don’t consider fees in a vacuum. They are only one part of the bigger picture including investment risks and returns and the extent and quality of services provided. Keep in mind the importance of diversifying your investments."