How Much Should I Save?
How much should I save for retirement? How much are your other clients saving for retirement? We dive into our client data in this post.
How much should I save for retirement? How much are your other clients saving for retirement? We dive into our client data in this post.
Two years ago, we first met with Pacer ETFs, a boutique Pennsylvania-based investment firm. After multiple meetings and extensive due diligence, we added their US Cash Cows 100 ETF (symbol: COWZ) to our investment models. This fund owns the 100 American companies with the highest free cash flow yield. Our conviction in this investment metric has grown over the past two years. Accordingly, we recently added two more "Cash Cow" funds to client portfolios.
In our first quarter market update, we offer our usual dose of optimism. This includes a historical look at what happens after a big up year in the stock market (such as we had in 2023), signs of a strengthening US economy, the folly of stock market predictions, and a 200-year chart of returns from US stocks, bonds, gold, and the US dollar.
tl;dr version of this post: all-time highs in the stock market usually mean the stock market will be even higher one year hence. The stock market has been sitting at an all-time high for nearly 30% of its history; it's quite common.
The Secure Act 2.0 was signed into law on December 29th, 2022. SECURE stands for "Setting Every Community Up for Retirement Enhancement". While the bill itself is not easy reading, it is important to understand the direct ways in which the legislation affects TWG clients.
As investors, there are always reasons to be cautious and reasons to be optimistic—often simultaneously. The bears and the bulls both have valid points. But to be a successful investor over multiple decades, it pays to remain optimistic.
There are about 253 stock market trading days per year. Over 20 years, that equates to 5,060 trading days. If you missed the 10 best days out of those 5,060, you only missed 0.2% of all the trading days (one-fifth of one percent), yet your returns would have been reduced by over 50%.
tl;dr version: Americans are very pessimistic right now. This is a contrarian indicator. Stocks have an 84% chance of being higher 12 months from now. It might take some time, but forward-looking return prospects are good when folks are discouraged. The average 12-month forward return in past instances like this is +15%.
A stock market correction is defined as a 10% decline in the market. We officially entered a correction earlier this week. We recognize that most of our clients are seasoned, savvy investors that do not hit the panic button after a correction. We are always impressed at how calmly the bulk of our clients handle recessions and even bear markets. That said, it’s still painful for all of us (advisors and clients alike). We know our clients are not immune to being troubled over market downturns – particularly when coupled with troubling geopolitical events.
January is going down as a tough month in the markets (putting it mildly). As I write this article on January 31st, 2022, the US stock market is down about 6.5% for the month. That is not one of the 15 worst months in US stock market history since 1950, but it’s a bad one.
If you were living in 1900, you likely did not own any stocks. Only 1% of Americans at that time owned stocks (vs. 56% of Americans today). And if you happened to be a part of that elite 1% stock-owning group in 1900, your main investment option was railroad stocks. Railroads were 63% of US stock market value!
As students of investing and markets, one of our passions is helping our clients grow in knowledge and appreciation of how the US stock market works. What exactly is "the stock market"? Today, there are approximately 3,667 publicly-traded companies in the US -- collectively worth over $50 trillion.