3 Principles That Round Out Our Strategy
In recent years, U.S. stocks have outperformed international stocks and growth stocks have outperformed value stocks, and this has led many to question the benefits of diversification. We should begin with a look at the appropriate lens through which to view investment strategy performance. Then we will address several issues that work to fog our lens and challenge our ability to stay the course. Taken together, we believe an understanding of these topics fosters the mindset necessary to remain disciplined in the face of adversity.
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Waypoint Wealth Management
Which Path Would You Take?
“I don’t know…something just doesn’t feel right,” you mumble through your mask to your primary care doctor while sitting on the examination table under a flickering fluorescent light in a room decorated with anatomical charts and hand-sanitizer dispensers. After listening to your heart and your lungs, the doctor diagnoses your feelings of worry as a mild condition that is easily treatable but could become serious if a proper treatment regimen isn’t followed. The doctor gives two treatment plans: one coming from the New England Journal of Medicine and the other from a health magazine that can be purchased at your local convenience store. Which plan do you choose?
The health magazines are filled with tips and tricks, such as how to burn body fat, jump-start the body’s metabolic rate, and build immune system strength. And they might even work sometimes. If you want to choose the treatment plan with the highest odds of success, it might give you more confidence to know that the medical journal, and its recommendations, are based on decades of data collected from research studies performed by medical experts and peer-reviewed by the medical community.
We face the same decision when it comes to investing. > SEE MORE
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Waypoint Wealth Management
The (Not So) Trivial Pursuit of Financial Contentment
Here’s some fun trivia for you to share with your friends as we head into the weekend:
Did you know you have to count to 1,000 before you’ll find the letter “a” in a spelled-out number?
We thought you could use that break from the deluge of mid-year news events and stock market commentaries on 2020’s bipolar extremes. The general theme has been how quickly global markets sold off and came back – even as economic and sociopolitical headlines continued to stoke bonfires of ongoing upheaval.
And the year is only half over. > SEE MORE
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Waypoint Wealth Management
How Can “Sequence of Return” Help or Harm You?
Clearly, there is a lot to think about when planning for retirement. While we have a degree of control over many of the choices involved, there’s one big wild card called sequence risk.
Sequence risk is the risk that you’ll encounter negative investment returns in early retirement. This is an important consideration, because the random sequence – or order – in which you earn your returns early in retirement can have a significant impact on your lasting wealth. Simply put, a retirement portfolio that happens to experience positive returns early in retirement has a better chance to outlast an identical portfolio that must endure negative returns early in retirement (if withdrawal amounts are not adjusted) … even if their long-term rates of return end up the same.
Since nobody can predict which return sequence they’ll experience early in their retirement, every family should prepare for a range of possibilities with their retirement planning. > SEE MORE
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Waypoint Wealth Management
What Has Historically Followed A Time Like This?
Having patience can be challenging when recent downturns have occurred. But the reality is that some of the biggest innovations (and opportunities) arise out of difficult times. And when it comes to investing, all we have is what those opportunities might bring us in the future. This is why investing can be hard when focusing on short-term movements for your long-term retirement plan.
We can’t go back in time and change the past, but we can return to the evidence, and review what has occurred each time. And while not perfect or any guarantee, we can put the odds in our favor to grow over time.
Our partners at Dimensional put this visual together (below) showing how returns have averaged coming out of downturns of -10%, -20%, and -30%. Please take a look as a reminder of how having a longer-term outlook has helped investors in times like these – to not only stay on course but also to be confident in what can lie ahead. > SEE MORE
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