Wealth Management Blog | WrapManager | WrapManager's Investment Policy Committee (21)

WrapManager's Investment Policy Committee

A “Wait and See” Approach Can Hurt Your Retirement

Posted by WrapManager's Investment Policy Committee

March 22, 2014

The 2008 financial crisis left many investors cautious about investing in stocks, and rightfully so. The thought of experiencing steep market declines is a recipe for losing sleep at night, and no investor wants that type of feeling about their portfolio.

Investing with caution is understandable, but it’s to the point that many investors could be inadvertently hurting their retirement by choosing to remain in cash and other short term investments instead of putting their money to work.

The Opportunity Cost of Waiting in Cash

A recent survey by BlackRock found that nearly half of investor’s portfolios are in cash, with a relatively small proportion dedicated to longer-term investments like stocks. What’s more, half of those investors said they intend to keep that cash in their portfolios for the next 12 months, and 36% of investors said they plan on increasing their cash holdings over the course of the year.¹

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Retirement Planning Investment Planning

4 Dividend Money Manager Strategies to Consider

March 19, 2014

The uncertainty surrounding the current interest rate environment has many investors rethinking their retirement income strategy. Some are considering dividend income as a way to generate additional cash for their income needs. Below are four dividend money manager strategies that invest in dividend paying stocks as a means to provide income for portfolios, while also offering the potential for equity-like returns over time. As always, we encourage investors to discuss these dividend money managers with your financial advisor before investing. (WrapManager is not affiliated with the money managers listed and has not approved for use nor entered into contracts with all of the managers. This is for informational and comparison purposes only.) [+] Read More

Selling Stocks to Generate Retirement Income? 3 Issues to Consider First

March 18, 2014

Many investors choose to sell shares of stocks in their portfolios every month, or perhaps every quarter, to raise the cash they need for retirement income. This isn’t necessarily a good or a bad method for generating retirement income, but there are three things investors should consider when taking this approach. 1) Tax Implications of Selling Stocks Investors should be mindful of realizing capital gains in their portfolios due to selling stocks. If the shares are being sold at a gain, it could mean having to foot a sizable tax bill the following year. These gains might be offset by selling stocks at a loss in the same year, but some investors may not have a lot of positions that carry a big loss—meaning you’ll be stuck with the tax bill. The current capital gains rate for investors filing jointly and making less than $457,600 is 15%, while anything above that threshold is taxed at 20%.1 [+] Read More

What is the Optimal Fixed Income Strategy in Retirement?

March 17, 2014

Many investors need to own fixed income in their portfolios to provide income and reduce volatility. But what percentage of fixed income is the ideal amount? Research conducted by BlackRock suggests that the optimal allocation to bonds actually fluctuates widely over time. Since 1900, the average optimal allocation to bonds as shown in the chart has been about 43%. But as you can see below, there were long periods when owning more bonds made sense (when the blue line is above the overall average), as well as stretches where owning much less than 43% in fixed income was considered optimal, like in the 60’s, 70’s and 80’s.1 Average Optimal Allocation to Bonds 10-Year Periods, Using 1900-2010 Annual Data, Cross-Country Averages (Click chart for larger version) Source: BlackRock [+] Read More

Profiling WHV Investment Management’s International Equity Strategy

March 14, 2014

Investors wanting to add an international (non-US) component to their portfolios should look to international money manager WHV Investments’ International Equity strategy as a viable option. The WHV International Equity strategy invests primarily in large-cap international growth stocks, with a belief that the most attractive global economic sectors can generate superior investment performance.1 As a performance benchmark, the strategy uses the MSCI EAFE Index, which represents developed markets in Europe, Australasia, and the Far East.2 To request detailed performance information on the strategy or to compare the performance of the WHV International Equity Strategy to other international strategies, please call one of our Wealth Managers at 1-800-541-7774. Alternatively, you can request the information here. [+] Read More

Holding Cash Can Protect Your Portfolio, but Can Hurt Your Retirement

March 13, 2014

According to data from BlackRock’s 2013 Investor Pulse Survey, investors of all types in the US hold 48% of their investable assets in cash, with 18% in stocks and 7% in bonds.1 Steady gains in the stock market have influenced some sidelined investors to reinvest over the last few years, but the BlackRock study makes clear that most investors remain risk averse following the most recent financial crisis. It’s understandable – many investors took a hit and don’t want to see that happen again. The cautious approach is understandable, but is being mostly in cash actually costing you in retirement? The answer: probably. [+] Read More

Emerging Markets Have Struggled Lately, But is a Turnaround Ahead?

March 13, 2014

The below chart spells it out pretty clearly—the Emerging Markets (in blue) have widely underperformed US stocks as measured by the Dow (in red) over the last two years: 2-Year Performance of Emerging Markets (EEM) vs. Dow Jones Industrial Average (DJI) Blue - Emerging Markets, Red - Dow Jones Industrial Average (Click chart for larger version) Source: Yahoo! Finance Not only have Emerging Markets been underperforming, they’ve just plain struggled. As an investor you probably see this and wonder - what’s the next move? Do I cut my losses and sell out? Or could this be a buying opportunity? [+] Read More

Is the Stock Market “January Barometer” a Cause for Concern in 2014?

March 12, 2014

The market was down 4% in January,1 and that’s left some investors wondering if they should be concerned about the “January Barometer.” This indicator is tied to that old stock market saying: “so goes January, so goes the year.” If the barometer is a reliable indicator, this could be a negative. So is it really reliable? Going back to 1979, in the 12 years the market fell in January, the market only followed along in 4 of those years – meaning the January barometer only predicted negative returns a meager 33% of the time.2 In our view, a 33% success rate just isn’t powerful enough that it should influence investment decisions. [+] Read More

4 Top Retirement Regrets and What You Can Do Now

March 10, 2014

BlackRock recently surveyed 17,600 investors across 12 countries in an effort to gather wisdom about investing and retirement. Here’s what retirees said they regretted the most: 36% said they would have started investing for retirement earlier and contributed sooner to their 401(k) at maximum levels 32% said they would have spent less 21% said they would have worked longer 12% would have sought professional advice1 If you’re still working and saving for retirement, or retired already, it’s important to take note of these four regrets so you can avoid falling into any of these categories. An investment plan can address—and even eliminate—these concerns. [+] Read More

Can Your Investment Plan Handle the Market’s Ups and Downs?

March 7, 2014

According to a recent survey conducted by BlackRock, “investors are uncertain about investing their savings, with only 35% confident that their retirement plan can cope with the ups and downs in the financial markets.”1 This leaves 65% of folks unsure of whether their portfolios can handle volatility and market declines over time, a number we think is too high. Here are two ways to feel more confident about how your portfolio is positioned. [+] Read More