June 14, 2013
Written by John Buckingham
“We are in a very interesting period in which poor economic data is actually viewed somewhat favorably by equity investors (as was the case following Monday’s PMI news) in that weak stats suggest that Ben Bernanke & Co. will delay the start of the tapering of its Quantitative Easing program, while fears of having to ‘Fight the Fed’ increase when positive economic numbers are released. Illustrating the latter, stocks plunged on Wednesday, due in part to the ISM Non-Manufacturing report.
“This gauge of activity (also known as the NMI) in the service sector, which is far larger than the manufacturing sector, came in better than expected: ‘The NMI registered 53.7 in May, 0.6 points higher than the 53.1 registered in April. This indicates continued growth at a slightly faster rate in the non-manufacturing sector.
“Happily, we suppose, much of the economic data in recent weeks has been mixed, just like the two ISM reports, with a few pundits throwing around the term Goldilocks to describe the state of affairs. By this, they mean that the economy is not too hot for the Fed to tighten and not too cold to slip back into recession. For another illustration of the point, we need look only at Friday’s all-important employment report.
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May 17, 2013
Written by Marvin Appel, Ph.D.
“How much do you need to retire? (Or, if you are already retired, how much can you safely spend?) These are the most important financial questions that our clients face. Although each family’s situation may call for a different answer, there are some guidelines that will serve most investors well.
“In October 1994, William Bengen published an article in the Journal of Financial Planning in which he analyzed (using Ibbotson data) how much an investor with 50% in the S&P 500 and 50% in intermediate-term Treasury notes could safety withdraw without depleting his savings. He found that for all 30-year periods covered within the data available to him, an investor could withdraw 4% of principal initially and increase that amount with inflation without running out of money. Subsequent to the publication of his study, it turned out that investors who had started drawing on their retirement assets in the mid-1960s would have run out of money in less than 30 years after the ravages of the 1966-1982 period (when inflation outpaced stock and bond returns).
“The problem with the conclusions of that study is the doubt that stocks and bonds will match their long-term historical returns in the future. This is especially true in the case of bonds where the historical return of 5.4%/year total return in the Ibbotson series is mathematically improbable with interest rates as low as they are now.
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April 18, 2013
Written by Chloe Lutts Jensen
In today’s Income Insights, in an article excerpted from The MoneyLetter, The Investment Reporter Editor Marc Johnson lays out some of his rules for designing a growth-and-income portfolio that won’t expose you to too much risk.
“Trying to squeeze income and capital growth from a single portfolio is the right choice for many investors. At the same time, however, it can lead to costly errors. But you can do it if you pay attention to some basic rules.
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September 14, 2012
Written by Jack Bowers
“You’ve just retired, and your portfolio is your main source of income. How should you invest, and how much can you safely withdraw from your nest egg? Bill Bengen, a California advisor, attempted to answer that question 20 years ago: Maintain a mix of 53% stocks and 47% bonds, and rebalance annually. Start by liquidating 4% of your portfolio balance the first year, then adjust that dollar amount upward by the rate of inflation (CPI). With that approach, Bengen contended, odds are high that your portfolio will last at least 30 years. Read More »
August 17, 2012
Written by Bob Carlson
“Investors are pouring money into an old investment: life insurance. That’s right. Life insurance can be an investment. Before interest rates were deregulated a few decades ago, life insurance and pass-book savings accounts at the local bank were a major vehicle for saving and investing for many people. It became less popular after money market funds and other high-yielding alternatives became available. Read More »
July 20, 2012
Written by Bob Brinker, Jr
“The Federal Open Market Committee (FOMC) held a two-day meeting on June 19th and 20th. At that meeting, FOMC members voted to keep the federal funds rate unchanged at the 0 to 0.25% range. The Committee anticipates that economic conditions ‘are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.’ Read More »
June 15, 2012
Written by Mark Salzinger
“Quite a few subscribers over the years have asked us about convertible securities funds, about which we have written little before now. Theoretically, such securities offer a compelling package: less risk than pure equities, combined with more income. However, holders sacrifice some potential for capital gains with most of these securities, versus holding their underlying stocks. Read More »