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Prognosticating a “risky” endeavor….The article in the link below provides some
interesting insights into the current stock market outlook of several
strategists. One interesting point is the concern that slowing earnings growth
will result in lower stock market returns over the next several years.
What’s the
point? The discussion, while
interesting, is somewhat humorous in the sense that these people think they can
actually forecast something. As a counterpoint to the earnings argument, there
are a number of reasons aside from earnings that could cause the market to
continue to rise at or near the longer-term secular rate of around 10% for the
next couple of years (rising valuations being one of those reasons). The
broader point with respect to financial planning is a) forecasting or timing
the stock market is difficult if not impossible; 2) investors (including our
clients) are much better served by not worrying about market gyrations and
investing in a broadly diversified portfolio of investments allocated among multiple
asset classes. A diversified portfolio provides for capturing growth among
several asset classes, but as importantly, improves ability to achieve higher
risk-adjusted returns by reducing portfolio volatility. As fiduciaries, we
believe appropriate risk-adjusted return is arguably the most important measure
of investment return in responsible wealth management. Link: http://money.msn.com/business-news/article.aspx?feed=BLOOM&date=20140818&id=17865313
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Looking at “worst case” scenarios……There a lots of good articles available on retirement
planning. The link below references an article that discusses several aspects
of financial planning including “worst case” planning.
What’s the
point? There a lot of factors that go
into retirement and estate planning. This article makes some very good points
regarding self sufficiency, legacy (estate planning), and worst-case planning.
A lot of people try to “go it alone”, without any background in investments or
financial planning. In most cases, this is not a good idea. One key benefit of
developing a financial plan with a professional advisor is the ability to
analyze multiple scenarios, including “worst case” planning. The advanced tools
and software that professional planners have available today provide excellent
forecasting and analysis capabilities that provide greater clarity and improved
decision-making. This is important in not only improved future planning, but
helps to reduce the probability of costly financial mistakes while reducing
anxiety about financial matters and improving one’s quality of life. Link: http://money.msn.com/retirement-plan/6-key-retirement-planning-steps
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