posted on April 17th 2018 in Austin CFP Team Posts with 0 Comments /

People want a sense of security — emotionally, physically and financially. The truth of life is that we try to manage a tightrope walk between chaos and order. If somehow we can incrementally achieve some order in a life that seems to gravitate toward chaos, we accomplish a great deal in creating a foundation for purposeful living.

Today’s market volatility certainly will challenge many people’s sense of security. Furthermore, personal life situations can be a weight on your shoulders. These things can lead people to get worried about things like running out of money in retirement and question whether they could be doing better.

With investing, it is important to remember that changes in the mood of the markets do not necessarily necessitate changes in your portfolio. As a matter of fact, if you have thoughtfully constructed a strategic investment policy that aligns with your values and goals, a reactive change to your investment strategy will most likely hurt you more in the long run than sticking with your plan.

My clients are no different than most people; they crave security. How wonderful, then, that specifically as it pertains to their finances, the majority of them primarily measure the value received from my advice as a sense of security.

How is this experienced and measured?

  1. Knowledge of their personal financial situation
  2. Progress toward their goals
  3. Investment returns

Having years of experience delivering financial advice is a good start to deliver in the three important areas above. Ensuring extensive upfront discussions to document personal values and specific situations and monitoring progress toward goals are things I constantly work on with clients. Having decades of backtested research showing the viability of our investment strategies is one of the most essential ingredients in setting expectations; it helps mold future behaviors that are intrinsically tied to successful outcomes. Finally, having a deep team and the resources to address complicated estate and planning issues that expand the limits of mere investment management is essential for life issues.

Having said this, people can still get filled with anxiety about issues they may not have time to fully digest. With today’s volatility, remember that if you have a good strategic investment plan and have addressed the other important issues in your financial life, you have the ability to ride through market volatility with a sense of security.

Index Review: Q1 2018 and Beyond

Table disclosures and http://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 © Russell Investment Group 1995-2013, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright © MSCI 2013, all rights reserved. Barclays Capital data provided by Barclays Bank PLC.

Given the volatility this quarter and the news headlines that grasp at these events, it probably goes without saying that most investors have a sense that the momentum of past year or two ran out of steam for the first quarter of 2018. Having said that, most indices were only slightly negative, with the exception of the U.S. and Global REIT indexes, down 8.15% and 5.52% respectively. Otherwise, taken in full, it was a rather undramatic quarter.

The media tends to overemphasize events for ratings and it seems that negative news tends to grab our attention. In truth, it is usually a tale of two cities. Here are a few headlines from the first quarter on both sides of the coin.

Given a reminder of the dispersion of headlines, it’s worth asking what you would you have done with your investment strategy without appropriate guidance. From day-to-day, conflicting news comes in that can really be confusing if you are trying to react to headlines. Headline whiplash is a symptom that reflects an ignorance of proper investment philosophy.

In the stock arena, value and small cap investors were not rewarded this quarter, as growth and large cap stocks outperformed. For those of you tilted to value and small companies because of their historical long-term performance advantages over growth and large companies, patience is the word of the day.

The Fed raised rates and signaled a faster pace in coming years. On the short end of the yield curve, the 1-month Treasury bill yield increased 35 bps to 1.63% while the yield on the 5-year Treasury note rose 36 basis points (bps), ending at 2.56%. The yield on the 10-year Treasury note increased 34 bps to 2.74%. The 30-year Treasury bond yield rose 23 bps to finish at 2.97%.

So, inflation seems to be gaining steam and the era of free money seems to be a thing of the past. Practically, it might prove harder for creditors to borrow money and they will most likely have to pay more for their loans in the future, which could put a damper on home sales, car sales, or anything that is traditionally financed. For those invested in bonds, it becomes essential to ensure your portfolio managers are well positioned on the yield curve as it steepens and looking into global opportunities if they are not doing so already.

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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