Almost half of active managers succeeded!

Here is an actual Wall Street Journal headline that popped up on my phone last week, “Almost Half of Stock Pickers Beat the Market in Early 2022 Selloff.” The subheading went on to exclaim that this was their best performance in 13 years.

Let me get this straight. 49% of U.S. large cap stock pickers achieved their goal by beating the S&P 500 Index over the first six months of 2022. That means 51% failed. And this is the best they’ve done collectively in over a decade. What is there to celebrate here? Was the bar really so low that more than half failing is considered a success?

Before you tell me that’s too short of a time period, the long-term numbers are consistently worse. You can see why we don’t overpay for traditional stock picking. I rest my case.

About the Author:

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

Fraud Warning

I’ve seen an uptick in fraud attempts lately. Let me give you a few recent examples:

Someone called my father-in-law claiming he’d won Publishers Clearing House. They said he couldn’t tell anyone or he’d lose his prize. He just needed to send them some money to cover the taxes. He called me to confirm his suspicions that it was fraudulent. – thwarted

Someone posing as Geek Squad called a client and gained access to their home computer.

Someone posing as Amazon called a client and gained access to their home computer.

Someone posing as the tax authorities called a client and demanded payment of back taxes. – thwarted

I can’t even list the number of bogus emails that come at everyone regularly. Our team also had loved ones and friends who experienced a catfish fraud (online phony love interest asking for money), a fraudulent kidnapping ransom request, a fraudulent bail money request, and a fraudulent request from a hockey coach asking for help buying gift cards. Some were thwarted. Some weren’t.

What can you do to protect yourself?

  • Don’t answer calls from numbers you don’t recognize. If it’s important, they’ll leave a message.
    • If it’s a message from the IRS, delete it. The real IRS sends letters if there’s an issue. They won’t call you. Heck, they don’t even have enough representatives to answer their phones.
  • Don’t click on links from emails you weren’t expecting. If it’s a legitimate issue, they’ll reach out again.
  • If you do want to verify something suspicious, open a new web browser to access your account the way you always do. From there find a trustworthy phone number to call. That will ensure that you don’t accidentally call a phony number or click on a malicious link. – Need help with this step? Ask me.
  • Most of all, slow down and take your time. If you’re being rushed to do something, that should be a red flag that something is wrong.

The fraudsters are not going away. In fact, they continue to get better. I’ve seen some of my brightest clients get fooled. Don’t be embarrassed if it happens to you. Reach out to us. We can help lock down your accounts and look for suspicious activity.

About the Author:

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

Money Market Funds – A 2022 All-Star

Naming investment all-stars for the first half of 2022 is somewhat like naming an all-star on Minnesota Twins teams in the lean years. There’s somebody who’s among the best players on the team, but is the performance worth celebrating? Yet baseball has a requirement that every team be represented with an all-star. In that spirit, I would like to name money market funds as my 2022 investment all-star.

Give me a second as you roll your eyes. Yes, money market funds are a top performing fund just because they didn’t lose money. It wasn’t a tough competition. That’s not why they are my all-star though. They are an all-star because they are quickly becoming a top choice for your emergency fund dollars. That’s right – money market funds are paying a competitive yield again.

Most money market funds are paying above 1% interest today, and you can expect that rate to keep rising as the Fed continues to raise interest rates. Compare that to your bank account or default cash option in your brokerage accounts. Yields in those funds still around with 0.1%. Banks are flush with cash and don’t need your deposits. If you’re sitting on a lot of cash, consider a money market. It has daily liquidity, a steady $1 value, and a better than average interest rate.

About the Author:

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

My Oversimplified Financial Plan

Financial planning is easy in your early years. If you’re wise and received good advice, you started saving 12%-15% of your income from your first day of full-time work. That works for the first few decades.

When you hit middle age, you will want to see if you’re on track to retire comfortably. That’s when you start to realize there are a lot of assumptions built into a long-term financial plan. Thankfully big companies like JP Morgan and Fidelity put together savings checkpoints that give you a clue about whether you’re on track.

As an example, Fidelity says have 3x your salary saved by age 40. JP Morgan breaks it down to a more specific multiple based on your salary. Those are super helpful for busy professionals who want a basic idea.

By the time you hit your 50s, you ought to take a closer look at when you can retire and what you can spend. Cherry Tree has a one-page financial plan that we use with our clients. But what if you’re looking for something simpler? Try this:

Step 1: Add up all your assets excluding your primary residence.

Step 2: Multiply your assets by 4% (we can argue about whether the number should be 3% or 5%, but 4% works for a rough plan).

Step 3: Multiply your monthly Social Security and pension payments by 12.

Step 4: Add the numbers from Step 2 and Step 3.

Example

Step 1: Assets = $1,500,000
Step 2: $1,500,000 x 4% = $60,000
Step 3: Monthly Social Security = $3,000; $3,000 x 12 = $36,000
Step 4: $60,000 + $36,000 = $96,000 annual spending if you retire today

That’s what you’ve saved up for today. If you want to know how much you can spend on the date you retire, you need to use a more detailed calculator. Reach out to me if you want help, or check out your 401k provider. I’m sure they have one where you can add in outside assets.

About the Author:

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.

Should You Buy The Dip?

Stocks are on sale this year. Should you buy the dip? While generally I would say yes, there are some important caveats.

  • Buy the dip is more reliable when you’re buying a diversified portfolio. Individual companies go out of business or fall into long-term slumps all the time. I can only think of one major stock market that has done that in my lifetime (Japan). In general, broad stock markets tend to recover.
  • Buy the dip only works if stocks are trading at a discount to fair value. If an overpriced stock falls, but it’s still overpriced, it can fall further. Need a possible example? Snap Inc. hit a high of $83 last year. It’s trading at $15. Don’t buy it today thinking it has to get back to $83 someday. It doesn’t. The company has never turned a profit…ever. How do you think it will do if we hit a recession?
  • Be prepared for further drops. If your only bear market experience was 2020, you must understand that rapid recovery was unusual. During the great recession (2007-2009), stocks fell for 17 months before they hit bottom. There were rallies in between that turned out to be head fakes. It took much longer than expected to get your money back.

As I apply those caveats, I would caution against buying the dip in U.S. tech (growth) stocks. They may still be expensive and don’t qualify as a diversified portfolio.

What does qualify? A global portfolio with thousands of stocks would be best.

About the Author:

John has more than ten years experience as an Investment Advisor. He focuses on devising and maintaining portfolios that meet individuals’ needs, investment research, and investment strategy. John has been recognized as a “FIVE STAR wealth manager” by Twin Cities Business Magazine 2016-2022. He is a CFA charterholder and CERTIFIED FINANCIAL PLANNER™ Professional.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.