Print
PDF

Monday Morning Quarterbacking

Written by Brandon Grundy, CFP®.

We've all heard stories about folks still working in their golden years because they can't afford to retire. While this is often due to forces beyond their control, there are also common but avoidable planning mistakes to learn from.

Along these lines, The Wall Street Journal has been running a series highlighting the plight of average Baby Boomers struggling to afford to retire. Titled Unprepared, the series looks at the lives of real people through the broader lens of what the Journal accurately portrays (in my words) as the slow-motion train wreck of many Americans reaching retirement age and largely being, well, unprepared.

I've been a financial planner long enough to have heard many stories and met many people who have made mistakes in the categories listed below. I don't think they're unintelligent or otherwise unworthy. Sometimes life gets in the way and our best laid plans fall by the wayside.

Often, clear solutions are only visible with perfect hindsight. My intention is not to mock but to raise awareness, so you don't repeat the mistakes of others.

The Journal article lays out four core retirement planning issues and I've commented on each:

Continue reading...

Print
PDF

Teaching Kids About Money

Written by Brandon Grundy, CFP®.

This past weekend I was barbequing with a group of friends, all dads of teenagers and younger, and one of the subjects talked about was how to teach our kids about money. We complained about how the subject is rarely taught in schools but agreed that it's our responsibility to give these tools to our kids. Teachers have enough on their plates already anyway.

We also talked about how technological advancement is bringing rapid change to so much in our lives, including personal finance, that it's more important than ever to arm our kids with the proper tools. In a fast-moving financial world where money is often a concept (and a changing one at that – think Bitcoin) versus something real, cash in your pocket, it's got to be hard for kids to learn about something they can't feel or see. Or maybe it's just hard for parents.

According to a study from T.Rowe Price, a mutual fund company, 74% of parents feel squeamish about discussing finances with their kids. 42% avoid the topic altogether and 28% lie to their kids about it. While the latter is unfortunate in many ways, it's understandable that many parents have a hard time discussing money-related topics. After all, behavioral science has shown how our relationship with money is often flawed, so it's natural to want to shield our kids from that. But the sad reality is that in doing so we're likely perpetuating the problem.

Continue reading...

Print
PDF

The Tao of Wealth Management

Written by Brandon Grundy, CFP®.

In the world of investing there are any number of news items floating around every week (or every day) that can throw you off your game. Just last week, for example, we heard that technology companies were having their worst days ever. Not easy news to wake up to, but easy to get worked up about.

On Thursday we saw the much-maligned Facebook lose about 20% of its market value in a single day. Twitter and some other tech names promptly followed suit. Was this the coming of Tech-Armageddon? Should investors sell everything and go to cash? The news media had a field day.

Ironically, while this surely was disconcerting for folks who were too heavily invested in these companies, investors who were appropriately diversified felt minimal impact. In fact, on the day of Facebook's decline, major stock market indexes like the S&P 500 barely budged.

Although it can sometimes feel like the stock market is being driven by a few big-name companies, fortunately the reality is something different. The economy has been growing slowly and steadily for some time and many companies across various market sectors are doing well.

Consumers are doing well also. We saw confirmation of this by week's end with the government's quarterly GDP report showing our economy grew by a steady clip of 4.1% in the second quarter. While this pace isn't likely to continue in subsequent quarters, growth is still moving in the right direction.

Good news right on the heels of bad news understandably leads to a bit of economic and market whiplash. What are investors supposed to think? Should they run for the hills, rush to buy more, or... gasp... do nothing?

While I've previously written about how important it is to control what we can control, and to leave the rest for interesting conversation, it never gets old repeating myself. But don't just take my word for it. The following short article from Jim Parker at Dimensional Funds about the Tao of Wealth Management offers an interesting perspective.

Continue reading...

Print
PDF

When Bad News is Good News

Written by Brandon Grundy, CFP®.

I hope you all had a wonderful 4th of July holiday last week. For me, it was a good time to reflect on how lucky and grateful I am to be an American, and to start looking forward to a bit of vacation. My family will soon be heading up to Lake Tahoe for some "togetherness" and a race I'm running up in the mountains. I'll still be working and accessible but will be taking a break from posting for a couple of weeks.

Last week we saw some interesting and encouraging news from the labor market. The unemployment rate went up to 4%. Why is that good news? Isn't declining unemployment a sign of a healthy economy? I thought I'd take some time to explain.

I've previously written and talked about how so much of what we pay attention to as investors is counterintuitive. We want to buy when prices are low, sell when prices are high, and save when others are spending. We also want to see metrics like the unemployment rate go lower, but not so low as to indicate problems in the broader economy.

Following a major spike during the Financial Crisis, the so-called headline unemployment rate, or the number most often quoted by the media, had been declining for years as people laid off during '08 and '09 finally found a job in the improving economy. Unemployment hit 10% in October 2009, eventually coming all the way down to 3.8% in May. This is good news on the surface, but of course there is more to the story.

Even as people found jobs, others simply stopped looking due to a variety of reasons (retirement, discouraged about their prospects, etc), and dropped out of the full-time workforce altogether. As they dropped out the Bureau of Labor Statistics stopped counting them in the headline number and the Labor Force Participation Rate declined to historic lows. This helped the headline number decline faster than it otherwise might have. The following charts from the BLS illustrate this.

Continue reading...

Print
PDF

Quarterly Update

Written by Brandon Grundy, CFP®.

The second quarter (Q2) of 2018 seemed to be all about tariffs. There was other market news of course, but headlines regarding the growing trade spat between the U.S. and China were what moved markets most. Even with the disconcerting headlines and market volatility, the U.S. stock market faired decently during the quarter, while foreign markets suffered the bond market held steady.

The Technology and Consumer Discretionary sectors performed well during the quarter, but the Energy sector followed crude prices higher, gaining about 14%. The worst performing sectors were Industrials and Financials, each down about 3%, mostly due to tariff concerns.

Following the S&P 500's technical market correction during the first quarter, investors were anxious about stocks as we entered Q2. The S&P made up some ground during March before tailing off again at quarter's end due to more tariff headlines. As strange as it may sound, market volatility trended lower during most of Q2, but several days of larger declines held down performance.

Here's a summary of how major market indexes ended the quarter

• S&P 500: up 4.3%, up 3.3% YTD
• Down Jones: up 1.8%, about flat YTD
• Russell 2000 (small company stocks): up 8.3%, up 8.2% YTD
• MSCI EAFE (foreign stocks): down 1.6%, down 2.5% YTD
• MSCI EM (emerging markets): down 9.7%, down 7.5% YTD
• U.S. Aggregate Bond Market: about flat for the quarter, down 1.7% YTD

Continue reading...