In no particular order, here’s a few interesting things I heard and read recently that I wanted to share:
The stock market is officially in a correction… here’s what usually happens next (CNBC, by Evelyn Cheng)
Recently we have seen a decent uptick in stock market volatility, and you may hear we are in “correction” territory. A “correction” means that the market has pulled back more than 10% from it’s 52 week high. Indeed on February 8th, the S&P 500 closed down more than 10% from the highs that it had reached just two weeks prior – so it happened pretty quickly. Corrections are a natural part of most bull markets that I have studied (on average they have happened 2-3 times a year), and many say they are actually healthy for the financial system. That said, it doesn’t mean that investors like them, in fact they scare the heck out of people! I admit, it’s not fun and it doesn’t feel good. But as gut-wrenching as pullbacks are, it’s also a reality check for those who got complacent thinking the markets just go up, up, up. While no one can predict how long or how far the pullback is, this article provides some statistics on previous market cycles and what has happened in those years. Pretty interesting stuff. Regardless, if you have a well-balanced portfolio and manage your risks well, I don’t think you have to worry. In fact, the economic data I see continues to strengthen: earnings are still solid, corporate balance sheets are in great shape, and we should see positive effects from the recent tax bill. Interest rates will most likely continue to rise, and that’s just a by-product from a strong economy. Fundamentally, I think the economy is in good shape. But at least review your portfolio to see if you aren’t taking on more risk than you need to!
After 45 Birthdays, Here Are ’12 Rules for Life’ (Bloomberg, by Megan McArdle)
I stumbled across this opinion piece while reading Bloomberg this week. It caught my eye because yours truly is also turning 45 this week. Yup, 45 years young! I have been mistakenly saying it for months now (honestly, I lost track), but I guess it’s a good thing to have already started using “45”. So this is an entertaining read more than anything, with the tip of “save 25% of your income” sticking out in my financial mind. I usually advise clients to save between 10-30% of gross income. To further clarify, I emphasize that people should strive to save AT LEAST 10% of gross income, with 20% being better (ideal) and 30% being best (aggressive, but often difficult to achieve). I have read stories about people saving 50% or more of their income – kudos to them – but these are the so-called unicorns! These are people who live extremely simple, non-extravagant lifestyles, and do things like drive the same car for 20 years. Anywho, the more you can save “the better”, but I typically see individuals able to save between 10-30% of income and have a decent balance in their lives. And for those saving less than 10%? Well, their may either lack discipline, live beyond their means, or don’t value a future dollar as much as a dollar today. For those people, I say CALL ME…I will help get you on a budget. By the way, if I had to add a Rule to this list: practice humility!
How To Do A Background Check On Your Financial Pro (Forbes, by Dayana Yochim)
Whether it’s a baby sitter, an employee, or a potential love interest…if you are like most people, you do a background check to gather info on that person. Our financial services industry is no different, and I always encourage EVERYONE to do a background check on their advisor – either their current one or one they may be considering. Oddly enough, not enough people do this even though the information is easily and readily available! This article by Forbes reminded me of this, so I figured I would do my part to spread the word as well. FINRA’s Broker Check tool is a click away, and the information is there for the taking. Hopefully the person you look up is not “barred” from the industry, but if you see the word YES next to “Disclosures” for that person… do yourself a favor and read more. You may find that previous client’s have pursued legal action against the advisor for various reasons, and this should raise some flags. Did they make prior unsuitable investments for people? It’s listed here. Prior DUI? Yup. Forged client signatures? You probably want to avoid this person! If you have any trouble managing finding the info, they have a helpful customer service line at 800-289-9999 or you can even ask the advisor for a copy of their U4 (they will either be surprised at your knowledge or scared that you asked!). Take it a step further and check out the CFP website to see if they are legitimately licensed (or have disciplinary actions). By all means, you owe it to yourself and the ones who care about you – do your homework because it’s the best 5 minute investment you can make. If you want to see mine: Brandon Background check.
Enjoy the light reading!