The stock market may have a seasonality. It matters more to short-term traders than long-term investors. We do not encourage short-term trading because the more decisions you make, the more likely you become emotional and may not be able to make rational decisions. Investing with emotions will likely cost you in the long run.
That being said, long-term investors can reference the economic cycle instead of seasonality. Based on the fundamental analysis, we know where the economy is heading, such as if we are in recovery or approaching recessions. Then we can project which asset classes and sectors may perform better than others.
Instead of selling all and waiting for market crashes, we need to be disciplined to stay invested, regularly rebalance your portfolio and add extra capital when the market is down to build wealth in the long run.
Being disciplined is to control what you can control such as having a savings and investing plan to know what to do and invest when the market is down. Most investors want to buy low and sell high. However, they usually do the opposite because they let their fears and greed control them. When the market is down, they tend to sell or change their investment objectives and strategies. As a result, they miss the market opportunities and their return lags behind, then they lose confidence in themselves and the stock market. It takes experience to get your emotions out of the way and take control when making your investment decisions. Until then, you may want to consult a professional to guide you and help you build your confidence.
Full story: Bloomberg
Is the 60/40 portfolio dead? Traditionally, retirees are recommended to own an investment portfolio with an allocation of 60% equities and 40% fixed income/bonds, ie. 60/40 portfolio, to generate income from bonds while enjoying value appreciation from equities. Also, historically, equities and bonds have had a negative correlation, meaning bond prices go up when equities fall. Therefore, bonds provide downside protection. Since 1980, the 60/40 portfolio generated 10% annualized return. However, in the past few years, bonds have generated negative returns because of a low rate environment. And when the bond prices fall when equities fall, bonds lose the hedging feature. Investors now start questioning if the 60/40 portfolio is dead. At Vibrance Wealth Management, we do not believe the 60/40 portfolio is dead. However, we need to reconstruct the components in the portfolio and recalibrate our expectations. If you are looking for income, you may need to further diversify into high quality corporate high yield bonds, high quality preferreds, global real estate, etc. If you are using fixed income as diversifiers, consider short to intermediate government bonds and corporate bonds, gold, haven currencies, etc. We do not recommend increasing risks to reach for returns to compensate for lower yields from bonds. It is a cliche, but it’s true that you need to know your investment objectives and risk tolerance to build a portfolio that can achieve your goals and ride out all the ups and downs.
Full story: Vanguard
Financial Planning Month is observed nationwide during October. We believe that financial planning is a blueprint for our financial lives. If you want to have a strong foundation of your financial life, you want to start with a financial plan to give you directions on what you want to achieve financially. Having a written plan allows you to see it and believe it. Financial planning includes investing, retirement planning, tax planning, estate planning and other ways to get your finances in order such as budgeting, managing your debts, etc.
Most cities offer Financial Planning days in October. Community members can register for a complimentary financial planning consultation with Certified Financial Planners (CFP®). Vibrance Wealth Management is proud of being part of pro bono services every year and offering our expertise to inspire you to take control of your finances. With an avalanche of educational resources online, you may feel overwhelmed with information that may not fit your unique financial situation. We encourage you to come to meet with our CFP fellows to discuss your situation and get valuable guidance.
Full story: Forbes
There is good news for first-time home buyers in California. Under the new California Housing Finance Agency program, you may be qualified for a forgivable equity builder loan up to 10% of the purchase price of your primary residence at 0 interest rate. It is subject to income limitations depending on the county you reside in and other requirements such as you do not own a primary residence in the past three years. Coupled with the softening housing market and low interest rates, it would be a great opportunity for first-time buyers to find your dream home and start building wealth.
Read more: California Housing Finance Agency