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

Welcome to our New Weekly Blog

We would like to welcome everyone to our new blog.  Hopefully, we will be able to bring some insight to things that are occurring in the financial markets.  We are also going to provide sound, time tested advice based on Nobel Prize winning research.  This advice will apply in good times and when things look bleak in the markets (as they do right now).  Thank you.

Waypoint Strategic Advisors