posted on July 19th 2019 in San Diego CFP Team Posts with 0 Comments /

Elegance can be defined as having the following characteristics: 

  • Pleasing
  • Innovative
  • Simple

As a thought experiment, ask yourself how many of these characteristics embody your life today? Then ask yourself if this what you want your life to be — especially moving forward toward retirement. You’ve been working hard to take care of your family, and the next thing you know you’re getting older and are contemplating retirement and wondering if you’ll be okay. If you’re like most people, your life has probably taken on the opposite characteristics of elegance over the years. There are perhaps less than pleasing aspects to your days where everything seems complicated and somewhat chaotic.

It just so happens that your investment ecosystem can be either complicated or elegant as well. Most people I speak with who have started thinking about retirement say they want to simplify their lives so they can enjoy them more. Unfortunately, they sometimes want to retain the complicated and time-consuming investment schemes and structures that have gotten them where they are, such as:

  • Owning a business
  • Owning real estate
  • Maintaining multiple accounts at multiple institutions

Anyone who owns or has owned real estate or a business knows how time-consuming, costly, and complicated they can be to manage effectively; it’s self-evident. But what most people don’t fully grasp are the liquidity complications of these investments. Liquidity refers to the ability to quickly convert your investment to cash. In retirement, you should be able to get your hard-earned cash when you want it, but with real estate and business ownership, unfortunately that may not be possible. This is referred to as liquidity risk. Furthermore, these types of assets are sometimes difficult to pass on to children with differing aptitudes and needs. Of course they can be passed on effectively, but usually require yet again more complicated and costly legal structures and administration to do so.

If you want to enhance your life with a financial plan that’s innovative, simple, pleasing and very liquid, there’s a way to do that. Get there by doing some planning with an experienced fee-only financial advisor whose investment philosophy is focused on tax-efficiency, low cost, simplicity and liquidity. These are the guiding principles I like to inspire my clients with — the elegant retirement strategy. It goes a long way to really embracing a fulfilling phase of your life where work is optional and life is enjoyable. 

2019 Q3 Review & Indexes Through June 30 2019

Table disclosures and (https://www.worthpointeinvest.com/disclaimer/) performance for periods greater than one year are annualized. Selection of funds, indices and time periods presented are chosen by the client’s advisor. Indices are not available for direct investment and performance does not reflect expenses of an actual portfolio. Past performance is not a guarantee of future results. Russell data copyright © Published and maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group,, all rights reserved.www.ftse.com  The S&P data are provided by Standard & Poor’s Index Services Group.  www.spdji.com MSCI data copyright © MSCI 2013, all rights reserved. www.msci.com. Barclays Capital data provided by Barclays Bank PLC.  www.bloombergindices.com.

The second quarter of 2019 proved to be another healthy quarter for all listed indexes. The S&P 500 Index shined again at 4.3%, while MSCI Emerging markets lagged all listed indexes — including the bond indexes — at 0.74%. The same theme of healthy index returns is consistent in the six months year-to-date returns as well. In summary, you should have experienced healthy returns not only for the quarter, but year-to-date in most well-diversified portfolios holding these asset classes.

The one-year period is a different story, as there is a sharp deviation between the “1 Year” S&P 500 index return of 10.42% vs. the “1 Year” Russell 2000 index return of -3.31%.  

Graphically, here’s what the global market looked like for a one-year period as represented by the MSCI All Country World Index:

It seems like the markets have just been on a continual robust climb for several years, but we can’t forget the significant downward correction that can be seen starting in the latter half of September 2018 through the end of that year. Hopefully, that will give you perspective on your one-year performance.

Bonds had another fine quarter across the board. For the “1 Year” period, the Global Aggregate Bond Index had a seemingly stock-like return of 7.87%, which speaks to the advantages of global diversification. 

Interest rates decreased in the US Treasury fixed income market during the second quarter of the year. The yield on the 5-year Treasury note declined by 47 basis points (bps), ending at 1.76%. The yield on the 10-year Treasury note fell by 41 bps to 2.00%. The 30-year Treasury bond yield decreased by 29 bps to finish at 2.52%.

In terms of total returns, short-term corporate bonds increased by 2.09%. Intermediate-term corporate bonds had a total return of 3.13%.

The total return for short-term municipal bonds was 1.12%, while intermediate munis returned 1.98%. Revenue bonds outperformed general obligation bonds.

Yield curve data from Federal Reserve. State and local bonds are from the S&P National AMT-Free Municipal Bond Index. AAA-AA Corporates represent the Bank of America Merrill Lynch US Corporates, AA-AAA rated. A-BBB Corporates represent the ICE BofAML Corporates, BBB-A rated. Bloomberg Barclays data provided by Bloomberg.  US long-term bonds, bills, inflation, and fixed income factor data © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). FTSE fixed income indices © 2019 FTSE Fixed Income LLC, all rights reserved. ICE BofAML index data © 2019 ICE Data Indices, LLC. S&P data © 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.

about the author: Morgan H. Smith Jr. IMBA CFP®

Morgan Smith Jr. IMBA, CFPMorgan H. Smith Jr. IMBA CFP, who has been a fee-only financial planner for over 12 years, specializes in wealth management for successful families, business owners, retirement plans and institutions requiring a disciplined fiduciary process.

An Assistant Professor at the University of San Diego, Morgan has been a frequent speaker to many professional organizations and has appeared on CNBC, Fox Business New Live and is a founding member of the Strategic Trusted Advisors Roundtable.

Learn More and/or Contact Morgan

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