Spring 2022 Newsletter

certain you are of a gain. For the
record, I am not talking about
a minimum of 20 or 30 years.
The fact is, there are far more
positive years in the markets
than negative. For example,
since the inception of the S&P
500 Index in 1957, there have
been 17 negative years in the
market, 1 zero, and 47 positives.
That is a positive to negative
ratio of 2.76:1. In other words,
for every negative year, there
are almost three positive years!
When you see the resilient and
impressive nature of the stock
market, it is easy to realize you
should hold on to those assets
and be greedy over them. Do
not sell them to someone else
for less than you paid.
Take Advantage of
Downside Strategies:
Let’s talk about smart strategies
you should be employing RIGHT
NOW.
BONDS
As your advisory team, we
automatically deploy certain
strategies for you. One strategy
that we use, we will have started
years before clients even retire.
If you are retired and utilizing
your investments for income
generation, we have kept you
in a healthy amount of bonds
or other fixed income assets to
protect your income. The right
kinds of bonds will help offset
the volatility of stocks and, more
importantly, give you a place
to pull income from during
negative stock periods. This is
a perfect example of not selling
stocks or stock funds while they
are down.
Starting in January this year,
we changed our client’s income
distributions to primarily pull
from fixed income investments
to do that until stocks recover.
This is a crucial step to protect
your stock market assets. That
is our part. Your part is to avoid
unnecessary large withdrawals
or panic selling.
In June of 2021, we felt the
Fed was being too soft on
inflation and not properly
increasing interest rates. We
figured procrastinating interest
rate increases would mean
they would have to get more
aggressive later. Unfortunately,
we were right. Fortunately, in June
we started moving into short
duration and other bond positions
that are more defensive to
inflation and rising rates.
MARKET MOVEMENT
Also, in January of this year, we
moved a few aggressive stock
funds into more conservative/
defensive positions. Although
none of these were drastic steps
like selling into cash, they have
and will likely continue to make a
significant difference over time.
More often than not, making
huge swings in and out of the
market is more detrimental
than market drops. You are
not psychic, so do not try to
be with market movements.
Simply riding through the
storm, holding firm to strategies,
and exercising diligence is the
tougher but better approach. In
short, we do not make drastic,
bold moves in and out of the
market; however, we do actively
adjust our models within certain
reason and strategy.
BUY
The next smart strategy to
employ during this time is to
BUY, BUY, BUY. Stocks are on sale
right now. Be greedy and gobble
them up. We always insist you
keep proper cash reserves and
emergency savings. Beyond
that, if you have excessive liquid
funds, now would be a smart
time to buy. If you are preor
IRA contributions. Better yet,
increase your contributions. Be
greedy.
If you are retired, not contributing,
or can’t afford to contribute
any more, do not worry. Your
investments are buying on the
dips for you. What I mean by this
is that you have many investment
positions still paying dividends.
Despite their stock prices
being down, many companies
are still profitable and paying
shareholders dividends.
Take a look at your monthly
statements so far this year.
You will see many line-item
transactions for varying dollar
amounts of dividends paying into
your account. We typically have
these dividends set to reinvest
automatically. This means if “X”
mutual fund pays you a $100
dividend, it automatically buys
for you $100 more of that same
fund.
This is what we call compounding
dividends, and it is massively
powerful. In this scenario, not
only do you have the same
number of shares before the
dip began, but you also gain
more if you reinvest dividends.
This will act as a compounding
growth factor as things recover.
Congratulations, you were
greedy and gained more shares
while prices were down.
STAY INVESTED
I urge you to stay invested. Do
not panic when things decline.
Market dips are temporary, they
always have been and always
will be, perhaps until the world
ends. Hopefully if that ever
happens, you and I are onto
bigger, better things! In all
seriousness, in the markets and life,
those who remain optimistic,
stay diligent, and follow a plan
tend to fare far better than those
who are pessimistic and panic.
Sources on page 8
Strategic Planning Group 7