So it's like those in the transaction based advisory world (banks, insurance companies, brokerage companies, independent firms like Edward Jones) essentially are saying we call our salespersons advisors, but, by definition, they're not actually advisors & they don't give advice, so they don't need to follow this annoying fiduciary rule thing...oh, and if you have any questions or maybe you're a bit confused by this, just ask your advisor!
Great article from Michael Kitces...
Product distribution industry beat DoL fiduciary by arguing their brokers aren't actually advisors! https://www.kitces.com/…/dol-fiduciary-5th-circuit-appeals…/ via @MichaelKitces
DFA'S "CORE" AND "ALL-IN-ONE" FUNDS EXPLAINED
Included are links to two PDFs. 2018 Core Solutions Brochure explains why we use “core” funds in our investment portfolios. One key component is how they are designed to reduce turnover (turnover is buying and selling stocks within the fund) and transaction costs. Reducing those ultimately lowers mutual fund costs, and those savings are passed on to you the investor in the form of a low expense ratio.
The expense ratio is the price you pay to be in the fund. A fund with an expense ratio of .31% means you pay $3.10 for every $1,000 you have invested in the fund, and you pay this on a yearly basis, too. The expense ratio is rolled into the price of the fund, you do not see it come out of your account like you do our management fee.
Depending on your investment portfolio selection, those funds are titled US Core Equity 1, US Core Equity 2, US Vector Equity, International Core Equity 1, International Vector Equity, and Emerging Markets Core Equity. I encourage you to read page 2 – there I highlighted some text explaining why we use them and how they are designed.
2018 Global Allocation Funds Brochure is for those of you with All-In-One funds in your investment account. These funds go by the names DFA Global Equity, DFA Global Allocation 60 / 40, and DFA Global Allocation 25 / 75. Pages 2 & 3 dive into how these funds are constructed and how they are managed behind the scenes.
MORE THOUGHTS ON VOLATILITY
I came across the below graphic in an article I was reading; unfortunately, I sent a screenshot to myself, but I can’t recall the article or else I’d send that along, too. We can see the types of drops the Dow Jones Industrial Average has seen over a century plus time frame. I underlined ‘has’ because it’s important to remember what has happened is no indicator of what will happen – future outcomes will be the same, better, or worse. But the bigger point is it’s not uncommon to see large drops. Yes, the moves are frightening and the same wild swings to the upside don’t elicit the same reaction, but in reality, these moves are common and are short-lived. Even the 20% or more drop is short-lived when they occur over a lifetime of investing and growing your wealth…and if we have heavy exposure to stocks then we must understand we’re investing for the long-term anyhow and we can’t let short-term movements derail our long-term focus.
MARKETS HAVE BEEN WILD LATELY, WHAT SHOULD YOU DO?
Nothing! There is nothing for you to do, except remain calm and know this is what markets do. They go up and down, and typically those movements are sharp and quick, too. Plus, as markets increase in value, the nominal movements represented by points in the DOW or the S&P 500 for example will go up and down in larger numbers compared to decades ago. That is why you’ll see headlines like “largest point drop in history!” Keep in mind percentage-wise these movements are normal.
I like this quote from this article [original article is missing], “These kinds of corrections are a normal process. Where the bottom is I don’t know but the fundamentals haven’t changed.” The term fundamentals is referencing the overall fundamentals of the U.S. (and global) economy. But I think you should look at your own fundamentals. And those are your reasons for owning stocks. For those of you a couple decades away from retirement, you have a heavy stock exposure because your fundamentals are ‘I want to grow my retirement pie as big as possible, therefore I have to stay calm throughout the craziness and I know I’m going to see a lot of it on my road to retirement.’
For those of you in retirement now, your fundamentals for owning stocks are ‘I can’t leave all my money in cash cuz inflation is going to eat away at it, so I need a balance of protection with a little bit of growth, too.’ Protection comes in the form of investment grade bonds which will continue to generate income for you during calm and crazy times, and historically have shown to do well when stocks do poorly (though this is not always the case). Growth comes from the right mix of a globally diverse stock exposure which will go down in value when the market goes down, but you’re not going to feel too much pain because it’s a smaller slice of your retirement portfolio. And when stocks go down Pensinger Financial takes a bit of your bond money and buys good companies while they’re on sale; over the long-run you buy low and sell high that way and that’s one way to generate growth from your stocks.
SEEKING INVESTMENT CERTAINTY IN AN UNCERTAIN WORLD
Have you been following the advice, or maybe thinking about following the advice, of a stock market guru on your favorite news channel? Is he saying “this is the next Amazon” or is she saying “Get out now while you still have any money left!” Stock market gurus and professional stock pickers are just as good [bad] at predicting the future as you and me. Sure, they’re going to be right sometimes; when the outcome is up, down or flat, it’s not too tough to guess right. The main issue, however, is being consistently right, and no guru is consistently right. Are we reacting to a guru who guessed right or to a guru who guessed wrong? This short article expands on the psychology behind why us humans seek out those we think can predict the future – and how the reason for that mentality is because we crave certainty in an uncertain world. When we react to uncertainty, we could run into major problems that could seriously derail our retirement aspirations. Instead of being reactive we need to be proactive with an investment philosophy rooted in decades of academic research; an investment philosophy that says we can’t predict the future, but we can prepare ourselves for how we handle the unpredictable future. When we face uncertainty, we don’t want to rely on the so-called predictive powers of someone we see on TV, instead, we want to rely academics, research, and data because over the long-term – and remember we invest for the long-term, not the short-term – they provide the certainty we crave in an uncertain world.
Q4 2017 QUARTERLY AND 2017 YEAR END REPORT
Here you'll find the Q4 2017 Quarterly and Year End 2017 Report. In it you’ll find a summary of returns of various major markets around the globe for Q4 and the entirety of 2017. It was a very good year for major markets; you can see this on page 21 in the attachment, and I have pasted the table below, as well.
We should have put all of our money in emerging markets, right – we would have got the best return? Wrong. We don’t know which markets are going to do great and which ones are going to fall off a cliff (see emerging markets 2008: down 53%!). We like seeing all green arrows pointing up, but the reality is this isn’t going to happen every year. Most years will be a mixed back of up and down returns and there will be years when we see all red arrows pointing down for our stocks holdings. This is investing. We don’t know which market is going to be great or terrible, and we don’t know if we’ll get all green arrows or all red arrows, so we need to have exposure to everything, so we can participate in their returns when they are great. And when those returns are bad, we know it’s a short-term bump in the road on the long-term journey towards building wealth for retirement. Over your long-term wealth building journey, you’re gonna see a lot more green arrows than red, so you need to be invested – and remain invested – or you’ll miss a once in a lifetime trip.
