Happy Holidays

We wish everyone a safe and happy holiday season.  We are so grateful to have wonderful friends and clients in our lives.  We look forward to a great 2012 and are kicking it off with a webinar about investing and the current financial market environment.  Click the link below to sign up for it.

https://www2.gotomeeting.com/register/131938058

Common Myths of Company Retirement Plans

According to the U.S. Small Business Administration, more than 40 million American employees have no retirement plan option at their place of work.  Most of these workers are employed by small businesses, or companies with less than 100 employees.

Through our discussions with many small business owners, we have found that there are a few specific reasons that retirement plans are not offered.  This blog post is designed to address a few of these.

The first myth we hear is that it’s too expensive to set up and maintain.  Much of the advice from professionals is built around this idea that retirement plans are too expensive to set up and maintain.  However, we have found the opposite to be true.  Competition is furious in the retirement plan arena, and this has driven costs of administering retirement plans down significantly.  Also, many service providers are waiving set up fees to gain new retirement plan clients.

The second myth we hear is that it’s time consuming and not for me.  This may not be the case any more.  Technology has decreased the time required to maintain retirement plans.  Also, when business owners see the advantages of having the retirement plan (personal savings, attracting and retaining good employees), they begin to understand the value it provides the business.

Finally, the last myth we hear is that you have to settle for poor advice and high fees.  This should never be the case in today's marketplace.   Once again, competition and transparency have resulted in a new standard of lower fees and  high quality advice for today's investment advisors.  The result of this are numerous low fee options based on sound, quality advice.

We feel that, in this business environment, this should be a significant part of a business owner's strategy for the future.  Please contact us if you have any questions.

Benjamin D. Coakley, CFP

Money and Happiness

Most people can define what money is to them.  And when we ask them, they generally define money as freedom, the root of all evil, a way to get things, etc.  We like to think of money differently at Waypoint. We like to define money as life energy.  This idea began with Vicki Robin and Joe Diminguez in their book Your Money or Your Life.  In this book, the authors explain a few basic principles that can help you think about your life and retirement.  The first point is that you can get to a point where you have "enough."  This is the point where having the nicer things isn't worth giving up the life energy necessary to have those things.  Many people unfortunately identify happiness and self worth with the amount of things they have in their garage or the amount of money they have in the bank.  Finding the optimal (not maximum) amount of wealth is extremely important to long term happiness because it allows you to have the time to do the other things in life.  The second principle in the book is that "X" really does mark the spot when it comes to financial independence and retirement.  The authors really believe that financial independence is attainable if people do the necessary things to make it possible.  It can happen because if you work at improving yourself and making yourself more valuable, then your monthly income should trend up over time.  And, at the same time, if you constantly monitor your expenditures, your expenses should trend down over time.  Everything in the gap between your monthly income and you monthly expenses should be available to invest.  Once the interest from your investments is more than your monthly expenses, you are working because you want to and not because you have to.  We hope these two principles can help you get more focused on your retirement and future.

Matt Coakley

The Flight Response to Market Fluctuations

Did you know that the average compound return for individual investors is substantially lower than the average compound return for the total market?  We feel the one of the main reasons for this is that investors tend to have the wrong emotions about the market at the wrong times.  For example, when the market is performing really well, investors tend to be extremely optimistic and are willing to bet everything they have.  On the other hand, when markets are performing poorly, investors tend to be extremely pessimistic and want to pull everything out of the market.  The actions of investors, as a result of the above described emotions, are what lead to investors significantly underperforming the market.  The truth is that when the market is really performing well investors should be pessimistic and when the market is performing poorly investors should be optimistic. 

Investors often try to pull everything out of the market when things are going poorly and then put everything back in when the market starts performing well again (or vice versa).  This is what leads to investors underperforming just simply leaving all their investments in the market.  The problem with trying to time the market is that an investor has to be right two times, when to get in and when to get out (or vice versa).

It's no secret that the market has been battered in the last few years.  This has led to many investors pulling all of their money out of the market.  There typically is a snowball effect because once investors start panicking, then other investors react the same way.  We call this the "Flight Response" because money starts pouring out of the market so fast that it often times compounds the losses in the markets.

Remember, that right now is the time to be optimistic in the market.  Stocks are on sale right now and you can buy more of them with less dollars than when the market is high.  However, we do not know when the market will turn around but, we are confident that it will at some point.  And when that happens, if you have been buying the stocks on sale, then you will have positioned yourself to experience much more of the rebound that those that chose to sit on the sidelines.

Ben Coakley

The Relationship Between Risk and Return...and Your Retirement

In today's investing world, many investors are really questioning their asset allocation and how that will help them or hurt them during retirement.  Many average investors are questioning the value of having stocks in their portfolio.  There is a real concern about the stock market because everyone just went through the worst ten year period in the market in our lifetime.

The real question that needs to be asked when evaluating stocks in a portfolio is how do you measure volatility.  There are two ways to measure volatility.  The first are the swings up and down (standard deviation) and the second is the purchasing power of your dollars (the impact of inflation on your portfolio).  Here is a great video from Dimensional about this topic: http://www.dfaus.com/2009/12/retirement-risk-and-return.html.

This video clearly shows that having some stock in your portfolio is critical for achieving your retirement goals.  Stocks can extend the life of your portfolio because you typically get higher net returns that you would in only fixed income.  Unfortunately, you will have to accept greater volatility to get these higher net returns.  This is the ever existent relationship between risk and return.

If you are interested in talking about your retirement, or looking at your portfolio and its risk and return characteristics, please contact us at 843-873-4420 or rick@waypointus.com.

Richard E. Coakley, Investment Advisor

Are you disciplined with your investments?

No one can accurately predict the economy.   That means that no one can time the market, predict inflation or forecast interest rates.   During turbulent times, it is important to have an advisor or advisors that keep you disciplined.   Emotions are a big reason people make bad market decisions.   Approximately, ninety-five percent (95%) of the success of your portfolio is determined by your strategy.  Your advisor(s) should help you develop a written strategy.  This is called an Investment Policy Statement.   This statement adds discipline to rebalancing and forces you to avoid timing mistakes (essentially removing some of the emotion of investing).   For additional information, please read the attached article, “Discipline: Your Secret Weapon”.   Call us if we can answer any of your questions or if you would like to set up a no obligation investment review.  Please visit our website www.waypointstrategicadvisors.com for more information.

David Plaisance, Investment Advisor Representative

The Downgrade Dilemma for Investors

We have received numerous questions from our clients, family and friends about what actions should be taken in light of the recent downgrades from Standard & Poors to our national debt, Fannie Mae and Freddie Mac, and numerous other agencies and banks.  We think it is important to first understand the role of Standard & Poors in our society.  They are an independent agency that rates the financial strength and the ability to repay debts on everything from countries to insurance companies.  This link provides a brief summary of Standard & Poors: http://www.standardandpoors.com/about-sp/main/en/us.  The downgrades most likely will result in very volatile markets and the length of this volatility is unpredictable.  However, there have been fairly recent examples of countries that have been downgraded and their markets continue to prosper.  Here is an article from Dimensional Fund Advisors about one such country: https://my.dimensional.com/insight/thewire/74104/.  This may or may not be the case with our country.  We believe that it is always appropriate to evaluate the amount of risk you are currently taking.  It is important to only take the amount of risk necessary to achieve your goals.  We also believe that capital markets are resilient and they are still one of the best ways to build wealth over the long term.  This is why we continue to be optimistic.

Ben Coakley