The Northern Star Newsletter 4/9/18: Quarterly Report
Message from Jon
This market has certainly been a lot less enjoyable when compared to 2017, but then again, we saw this market condition coming for some time now. We will also likely see it sticking around for the majority of 2018 and possibly into 2019, before the selling really shows up in force and sends the indexes down further.
According to Crestmont Reseach,
"(1) NEW: Serious Implications: Forecast Skew Over the Next Decade.
This article describes and demonstrates the serious implications of forecast skew for long-term stock market returns. Spoiler alert: Most forecasts for stock market returns from Wall Street analysts average near 6% annually. However, there is almost no chance of a 7% annualized return for the next decade, but high chance that it's between 0% and 6%. This outlook should be empowering, not concerning. There is a lot that can be done by and for investors to achieve success, even when returns from the stock market are so far below average."
I have to admit that when I am reading this, I am not encouraged. However, I have to keep in mind that even during a secular bear market cycle, investment years like 2013 and 2017 are not only possible, but probable as well! Many investors are not capable of taking the good with the bad and therefore end up making irrational and emotional decisions when it comes to their portfolios. They are the same people you run into that feel good when it's sunny and bad when it's rainy.
The proper approach to investing is simple, but it is definitely not easy.
Develop a comprehensive plan and approach
- One that includes
- Amount of required portfolio value at retirement
- Amount of contribution necessary to reach said goal
- Plan of debt management by retirement
- Plan of income creation during retirement
- Deploy said plan
- Regardless of age or market condition
- Monitor said plan
- For opportunities for improvement
- For unplanned needs that arise
- For changes to life-path
- For potential risks to plan integrity
- Periodically adjust plan components to better align to new conditions and circumstances
- Repeat steps 3-4
Let's face it, the markets are going to ebb and flow in and out of favor. Your circumstances are not always going to be plannable and predictable. The key to arriving at your personal financial summit safely is to plan, prepare, and remain diligent so that whenever the unpredictable or unplanned situation or circumstance arrives, you are capable of dealing with it successfully.
Till we speak again, enjoy this "spring" weather!
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.