Broker Check

The RFG Weekly Wealth Report

October 12, 2015
Share |

Just a few weeks ago, on September 17, the Federal Reserve Open Market Committee (FOMC) decided to leave the fed funds rate unchanged. In part, this was because, "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term."

The next day, September 18, stock markets tumbled. By the time September was over, many markets had closed on their worst quarter in four years, according to the BBC. The Dow Jones Industrial Average fell by almost 8 percent, Britain's FTSE 100 was down 7 percent, Germany's Dax was off by almost 12 percent, and the Shanghai Composite lost more than 24 percent.

Last week, on Thursday, the minutes of the FOMC meeting were released. Investors' response was quite different. Barron's reported many believe a rate hike during 2015 is less likely than it once was, and that reinvigorated investor optimism:

"Going into Friday's session, global equity markets' valuations were enriched by some $2.5 trillion, according to Bloomberg calculations. As for U.S. stocks, Wilshire Associates reckons that they tacked on 3.44 percent, or approximately $800 billion, over the full week, based on the gain in the Wilshire 5000 index, their biggest weekly gain in nearly 12 months."

Why does the same news elicit two very different responses? There are many reasons. Foremost among them is the fact a lot of elements influence markets--investor confidence, company valuations, central bank actions, automated trading, and many others.

What does last week's upward push mean? One analyst cited by Barron's suggested we're seeing a bear market rally, but only time will tell.

DO YOU HATE DOING LAUNDRY? THEN, YOU MAY BE IN LUCK. The world's most recent laundry bot was introduced at Japan's 2015 Combined Exhibition of Advanced Technologies (CEATEC), a technology trade show. The Telegraph reported the robot was developed to eliminate the tedium of laundry, which (as moms and dads everywhere know) is one of the least popular household chores. Not only does 'Laundroid' wash and dry clothes, it also can sort them, fold them, and put them away in a cupboard.
If you're thinking, it sounds to good to be true, you're right--for now. Digital Trends pointed out Laundroid works quite slowly:

"The last laundry-folding robot we saw in action took a long time to get a small towel neatly folded into a little rectangle, and that was with the video sped up. Laundroid is no faster, based on a demonstration at the CEATEC...It took several minutes for the robot--hidden inside a futuristic-looking black cabinet--to fold up a freshly washed T-shirt, according to Engadget. Although it did the task decently, if not in Martha Stewart-approved style, it's obviously not ready to take on a basket full of jeans and sheets."

The fly in the ointment is the bot must determine a shirt is a shirt, and a pair of pants is a pair of pants, and so on, before it can fold items. After all, each item is folded differently. Socks, it seems, pose a particularly ticklish challenge. So, how long does it take? Laundroid needs about seven hours to fold a basket of clothes.
If you have a lot of laundry, you may want to check back in a few years.

 

Quote of the Week

"Human subtlety will never devise an invention more beautiful, more simple, or more direct than does nature because in her inventions nothing is lacking, and nothing is superfluous."

-- Leonardo da Vinci, Inventor

 

Golf Tip of the Week

Drill for Solid Contact

Making solid contact with the center of the golf ball is one of the biggest fundamentals to making more consistent shots. How and where you hit the ball will affect the spin, launch angle, distance, curve, and path of the ball - everything. It can also affect your perception of your swing. That is to say, off-center contact can lead you to believe you have other problems with your swing, causing you to change your swing dynamics to compensate. To be a great ball striker you need to have the ability to hit the ball in the exact center of the face.

Here's a great drill that will help you dial in your contact: Next time you're on the course, take along two extra balls and a permanent or dry erase marker. If you're using range balls, definitely use the dry erase marker so that you won't permanently mark them up.

Using your marker, draw a big dot on the ball so that you can see where you're striking the ball each time by where your impact mark compares to the dot. If you find that you're hitting the ball too much on the toe or heel of the ball, you can use the following drill.

If you're hitting too much ahead of the dot, set up two balls in a line away from you, with the dot ball being the one farthest from you. Often, the cause of toeing the ball is striking with your arms too close to your body. Tee up to the closer ball but strike the dotted ball to help yourself feel the right extension in your arms.

If you have the opposite problem, tending to heel the ball, perform the same drill but place the dotted ball closer to you and tee up on the farther ball.

 

Financial Question of the Week

Do you really need a financial advisor?

If there is one thing that many investors "know for sure," it's that the need for financial advisers went out the window with the advent of online trading and index mutual funds.

Is that true? Are advisers the 21st Century equivalent of the buggy whip?

Not according to a recent research report by Vanguard called "Advisor's alpha." Vanguard suggests that advisers can help add value if they "act as wealth managers and behavioral coaches, providing discipline and experience to investors who need it." Here are three areas where Vanguard suggests advisers can add value.

Avoiding bad behaviors

In the most recent version of the study, Dalbar showed that the 20-year average returns for the Standard & Poor's 500 Index and Barclays Aggregate Bond indexes were 8.21% and 6.34% respectively. You would expect the average investor return to be in the same general vicinity as the benchmarks. Instead, the average equity investor earned just 4.25% per year and the average fixed income investor earned just 0.98% per year over the same 20-year period.

Vanguard suggests that "Advisors, as behavioral coaches, can act as emotional circuit breakers in bull or bear markets by circumventing their clients' tendencies to chase returns or run for cover in emotionally charged markets."

Portfolio construction

Asset allocation is a critical element of portfolio return. Some studies conclude that as much as 90% of portfolio return can be attributed to asset allocation. Vanguard points out that many investors "neglect it on their own, overlooking its contribution to their long-term investment success."

Having a suitable asset allocation cannot only bolster returns, but it can have an important psychological effect as well. Vanguard suggests that knowing the allocation "was arrived at after careful consideration, rather than as a happenstance of buying funds with attractive returns ... can serve as an important emotional anchor during those all-too-frequent uprisings of panic or greed in the markets."

Tax-efficient strategies

Taxes can have a significant effect on portfolio return. This is especially true during retirement when investors begin to draw money from their accounts. 

A competent adviser can help clients design a distribution strategy that takes taxes and other important considerations into account, which can increase financial security. Again, according to Vanguard: "A well-thought-out drawdown strategy can improve the likelihood that the client's assets will be able to support his or her financial goals through retirement and beyond, which is a significant - if hard to quantify - added value."

Depending on your situation, a full service wealth manager may be able add value in many more areas than the three listed above.  If you or someone you know would like help to analyze your financial position and determine whether or not professional wealth management can add value, please contact my office for a complimentary review.