Not 2008, not the early 1980s, but 2022 was the worst year for bonds on record, according to an analysis by investment historian Edward McQuarrie.
That’s more than a headline for financial advisors who have relied on fixed income as the less-volatile portion of their 70/30 or 60/40 portfolios – especially for their retirement-age clients. It’s a breakdown that can have lasting effects on those who can afford it the least, unless the advisor has a strategy for mitigating the risk of those impacts.
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Topics:
Systematic Investing
Just one of these scenarios likely would be enough to cause concern for an investor:
- Potential end of the post-Global Financial Crisis secular bull market in equities
- Prospect of the first sustained rising U.S. interest rate environment in more than 40 years
- Highest inflation level in four decades
Yet in 2022, we’re facing all three at once. It’s a potentially catastrophic combination, especially for investors nearing or in the early years of retirement.
In my opinion, this is a “perfect storm” (yes, I know that’s a super cliché saying – even I cringed when typing it). And it demonstrates how the need for a more modern approach to retirement income has never been greater. It also motivated my colleague, Brandon Langley, and I to embark on a research project into different approaches to sustaining clients throughout retirement. Today, we’ve released our findings in a new white paper available to financial advisors, “An Advisor’s Guide to Protecting Retirement Income.”
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Topics:
Systematic Investing
When we travel by air, my wife usually points out that she thinks it would be better if people by windows boarded first; that way, anyone in an aisle or middle seat wouldn’t have to keep standing up. Meanwhile, I think the Southwest Airlines style of pick-any-open-seat is optimal.
Our “gut feelings” were recently rendered irrelevant when we ran across an old episode of “MythBusters.” In it, the cast built a mock 173-seat aircraft and tested several boarding approaches using real people and luggage.
Relying on the data cut through the emotional biases. It also inspired me to take a similar data-backed look at a common question I hear about systematic investing: Is this style of investing capable of reacting fast enough to declining markets?
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Topics:
Systematic Investing
A friend recently convinced me to watch a new(ish) Netflix documentary, “14 Peaks: Nothing is Impossible.” It follows a Nepalese mountaineer who attempts to climb all 14 of the world’s peaks higher than 8,000 meters in less than seven months.
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Topics:
Behavioral Finance
Call me a luddite if you like, but few things annoy me as much as when I navigate to a new webpage and that, “How can I help you?” box pops up on the lower right. That chatbot entering uninvited always sends me on a frantic search for how to make it disappear as quickly as possible.
Those bots have fully infiltrated the online world: banks, municipal governments, dental offices, nonprofits. Even a robot for my neighborhood grocery store recently wanted to talk to me when I simply needed to verify the hours!
I think about this scenario as it relates to investors. With so much money moved into robo-advisors, what is the experience going to look like when REAL people have REAL questions? “How did the S&P close yesterday?” is easy for a robot. But what answer is going to pop up when the question is, “The market is collapsing! What should I do?” or, “How do I reduce risk in the midst of this volatility?”
More to the point of this blog: How different would the answer be if it were coming from a trusted financial advisor?
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Topics:
Advisor Practice Management