Schwartz Financial Weekly Commentary 7/16/18

The Markets

Investors are becoming more discriminating.

Trade tensions escalated as the U.S. administration expanded tariffs on Chinese goods last week. You wouldn’t have known by watching the performance of benchmark indices, though. Just four of the 25 national stock market indices tracked by Barron’s – Australia, Italy, Spain, and Mexico – moved lower.

However, if you look a little deeper into the performance of various market sectors, you discover an important fact: The market tide wasn’t lifting all stocks.

It has been said a rising tide lifts all boats. When translated into stock-market speak, the saying becomes, ‘A rising market tide lifts all stocks.’ In other words, when the market moves higher, stocks tend to move higher, too. That wasn’t the case last week.

Barron’s reported investors have become more selective:

“We went from a market where everything moved largely together to one where sector fundamentals began to matter more than where the S&P 500 was going…At the sector level, it’s apparent that no one has been ignoring tariffs. While the S&P 500 has gained 1.7 percent over the past month of trading, industrials and materials have dropped 2.5 percent, while financials have slumped 2.9 percent, hit by a double whammy of trade fears and a flattening yield curve. Utilities and consumer staples have outperformed, gaining 8.1 percent and 3.5 percent, respectively.”

Utilities and Consumer Staples are considered to be non-cyclical or defensive sectors of the market because they are not highly correlated with the business cycle.

Defensive companies tend to perform consistently whether a country’s economy is expanding or in recession. For example, a household’s need for power, soap, and food doesn’t disappear during a recession. As a result, the revenues, earnings, and cash flows of defensive companies remain relatively stable in various economic conditions.

In addition, the share prices of these companies tend to be less susceptible to changing economic conditions. Defensive stocks tend to outperform the broader market during periods of recession and underperform it during periods of expansion.

 

Data as of 7/13/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.5% 4.8% 14.4% 10.1% 10.7% 8.6%
Dow Jones Global ex-U.S. 0.5 -4.3 4.2 3.2 3.3 1.0
10-year Treasury Note (Yield Only) 2.8 NA 2.4 2.4 2.6 3.9
Gold (per ounce) -1.1 -4.2 1.9 2.5 -0.7 2.5
Bloomberg Commodity Index -2.8 -4.9 2.3 -5.6 -8.2 -9.6
DJ Equity All REIT Total Return Index -0.9 2.2 6.8 8.3 8.3 9.1
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

what are the biggest risks for retirement investors? If market risk, inflation risk, and interest rate risk were on the tip of your tongue, you need to update your list.

Recently, T. Rowe Price surveyed employers that make defined contribution plans, like 401(k) plans, available to their employees. The company asked plan sponsors to rank the risks they were most concerned about for the people who saved in the plan. The top concerns were:

42 percent =   Longevity Risk. No one knows exactly how long they will live, which makes it difficult for plan participants (and anyone else planning for retirement) to be certain future retirees won’t outlive their savings. Longevity risk was among the top three risks listed by 95 percent of plan sponsors.

25 percent =   Participant Behavioral Risk. “Left on their own, participants tend to take on either too much or too little risk by: failing to properly allocate and diversify their savings; overinvesting in company stock (or stable value/money market funds); neglecting to rebalance in response to market or life changes; and attempting to time the market,” explained T. Rowe Price.

14 percent =   Downside Risk. This is the likelihood an investment will fall in price. For instance, stocks have higher return potential than Treasury bonds, and higher potential for loss. When planning for retirement, it’s important to balance the need for growth against the need to preserve assets.

If you would like to learn more about these risks and strategies that may help overcome them, give us a call.

Weekly Focus – Think About It

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”

–Sun Tzu, Chinese general and military strategist

PLEASE TAKE A MOMENT TO READ THE FOLLOWING, THIS WAS COPIED FROM A FRIENDS POSTING ON SOCIAL MEDIA

The clock is running …

We lost a good friend and neighbor, a devoted husband and father of 7, on my birthday this week. After attending his celebration of life, I am hyper aware of the truth today: the clock is running.

Time she flies.

We cannot stop, stall or rewind her. The timer on our lives has been set. None of us knows when our last conversation with our loved ones will happen or when our last breath will be taken.

As for me, I seek to live every day without regret. I don’t always achieve my goal. But today I am recommitting to live on purpose, to consider the lasting impact of my present actions, and to make sure my wife, kids, grandsons, parents, sister and friends know how much I love them.

I encourage you all to ask this vital question today: If this is my last day, will those I leave behind know how much I love them?

Value vs. Growth Investing (7/13/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 1.39 6.26 1.03 6.26 17.03 12.16 12.93
US Core 1.01 1.36 0.26 3.83 10.51 10.83 11.98
US Growth 2.17 16.83 2.31 11.84 29.31 15.02 16.36
US Large Cap 1.71 6.25 1.11 6.12 17.34 12.65 13.21
US Large Core 1.12 0.69 0.11 3.19 9.61 11.40 12.11
US Large Growth 2.40 16.90 2.23 10.84 29.71 15.78 17.34
US Large Val 1.01 -0.43 0.23 1.78 10.92 10.05 9.70
US Mid Cap 0.78 5.71 0.82 5.97 15.70 10.82 12.40
US Mid Core 0.96 2.05 0.87 4.57 11.94 9.14 11.91
US Mid Growth 1.47 12.66 1.08 9.56 23.89 11.52 12.98
US Mid Val -0.11 2.37 0.49 3.55 11.11 11.66 12.21
US Small Cap -0.13 8.05 0.83 8.58 17.68 10.82 11.40
US Small Core -0.14 5.63 0.39 7.37 14.96 10.08 10.96
US Small Growth 0.32 15.85 1.97 10.84 26.93 12.73 13.13
US Small Val -0.62 2.88 0.07 7.41 11.30 9.46 9.99
US Value 0.67 0.38 0.27 2.53 11.06 10.37 10.26
2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

Office Happenings:

7 Rules of Investing

From 1977 to 1990, Peter Lynch ran one of the most successful mutual funds ever, posting an average annual return of 29%.

There are many principles of investing Lynch has espoused over his career. I thought you might be interested to see seven of them in a special infographic I’ve created. They are the same principles we follow here at Schwartz Financial.

I hope you find this infographic insightful. As always, please feel free to call us at 215-886-2122 if you ever have any questions about your own investment portfolio!

7 Rules of Investing

Have a great week!

Regards,

Mike

Michael L. Schwartz, RFC®, CWS®, CFS

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

 

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.

 

This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

 

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

* Past performance does not guarantee future results.

 

* You cannot invest directly in an index.

 

* Consult your financial professional before making any investment decision.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.

Schwartz Financial Weekly Commentary 7/2/18

The Markets

There’s a bear in China – and it’s not a panda.

The Shanghai Stock Exchange (SSE) Composite Index, which reflects the performance of all shares that trade on the Shanghai Stock Exchange, dropped into bear market territory last week, reported CNBC. The Index has fallen more than 20 percent from its previous high. It appears some investors saw an opportunity and bought the dip since the SSE Index bounced higher last Friday, gaining more than 2 percent.

Slower economic growth and rising trade tensions were responsible for much of the red ink in China, reported Barron’s, but the Chinese government may be playing a role, too:

“What’s got global market watchers worried is that China’s stocks are sliding in tandem with its currency, the renminbi or yuan…That suggests China is using the exchange rate as a weapon. ‘The most effective way for China to retaliate [against] rising U.S. tariffs is to weaken the yuan,’ according to the July Bank Credit Analyst. That could roil financial markets, however. The dual declines in China’s equity market and currency are raising concerns of a repeat of 2015. Treasury strategists at NatWest Markets recall that the drop in the yuan that summer sparked severe equity market losses, including a 10.5 percent correction in the S&P 500.”

That may explain, in part, why U.S. Treasury bills were so popular last week, although it probably didn’t hurt the yield on short-term Treasuries was roughly equivalent to the dividends paid by the Standard & Poor’s 500 Index.

The coming weeks may deliver more excitement than Fourth of July fireworks.

 

Data as of 6/29/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -1.3% 1.7% 12.3% 9.7% 11.0% 7.8%
Dow Jones Global ex-U.S. -1.1 -4.9 4.9 2.9 3.8 0.5
10-year Treasury Note (Yield Only) 2.9 NA 2.3 2.3 2.5 4.0
Gold (per ounce) -1.5 -3.6 0.6 2.1 0.1 3.0
Bloomberg Commodity Index 0.1 -0.9 7.5 -4.6 -7.0 -9.3
DJ Equity All REIT Total Return Index 0.9 1.3 4.9 9.4 9.0 8.3
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

from asia with love. Sometimes the hottest trends in other regions of the world are similar to those in the United States and sometimes they’re very different. Here are three recent chapters in the book of Asian cultural trends.

Improving your future wife’s ROI. Single men in the Land of the Rising Sun are trying to increase their value on the marriage market by taking parenting classes. The lessons include developing empathy for future spouses by wearing pregnancy suits. The Atlantic reported, “The man in the traditional kimono is having difficulty…The weight of the belly strains his back. Simply walking around the room – a party room in a Tokyo condo building – is more like lumbering. Lying down and getting up again is a struggle. The rest of the men in the Ikumen class laugh as he tries to adjust to the new reality.”

Shopaholics rejoice. ‘Shopstreaming’ is a little bit e-commerce and a little bit live streaming, reports Trendwatching Quarterly. “Asians are social shoppers – they rely on social media recommendations for their purchase decisions. For many, the ability to talk to sellers and buyers can build trust and allay fears about counterfeit goods. In Southeast Asia, 30 percent of e-commerce sales are started on social media and completed in messaging apps…”

It’s not just puppy love. Newly minted middle classes in developing nations are turning to pets for comfort and companionship. In emerging markets in the Asia Pacific region, Spire Research reports, “Changes in consumer lifestyles and rising disposable income are driving acceptance for pets and boosting the entire pet-related industry along the way.”

Trends are entertaining. As in any industry, they also can help business owners unearth expansion opportunities and help asset managers discover companies with potential.

Weekly Focus – Think About It

“I learned to make my mind large, as the universe is large, so that there is room for contradictions.”

Maxine Hong Kingston, Chinese American author

Value vs. Growth Investing (6/30/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market -1.43 3.08 0.65 3.71 14.70 11.65 13.31
US Core -1.36 -1.27 -0.11 1.71 8.53 10.45 12.40
US Growth -1.92 12.03 1.62 7.71 26.23 14.27 16.70
US Large Cap -1.29 2.88 0.50 3.57 14.87 12.15 13.52
US Large Core -1.24 -1.97 -0.32 1.08 7.56 11.09 12.48
US Large Growth -1.58 12.34 1.65 7.01 27.24 15.21 17.72
US Large Val -0.80 -2.68 -0.03 0.47 8.76 9.68 10.04
US Mid Cap -1.57 3.01 1.12 3.12 13.83 10.33 12.92
US Mid Core -1.51 -0.45 0.62 1.62 10.47 8.68 12.41
US Mid Growth -2.12 8.50 1.45 4.98 20.54 10.70 13.41
US Mid Val -1.06 0.90 1.17 2.56 10.23 11.50 12.85
US Small Cap -2.38 5.33 0.86 7.02 15.52 10.19 12.11
US Small Core -2.37 3.26 0.34 6.28 12.62 9.39 11.78
US Small Growth -2.58 11.57 1.43 7.89 23.70 11.84 13.66
US Small Val -2.15 1.31 0.79 6.85 10.40 9.16 10.76
US Value -0.95 -1.67 0.28 1.33 9.24 10.05 10.69
2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

 Office Happenings:

Independence Day – JFK Speech

Everyone knows that July 4th is “America’s birthday.”  It’s the commemoration of our national independence.  A day for fireworks and fun, patriotism and pie.  A celebration of America itself.

But in a sense, the Fourth of July is even more than that.

Two-hundred and forty-two years ago, a group of Americans gathered together to sign one of the most extraordinary documents ever written.  I’m referring, of course, to the Declaration of Independence.  Historians debate which day the signing actually took place, but in the grand scheme of things, details like that don’t matter.

What matters is what came next.

A Trumpet Call of Freedom

President John F. Kennedy explained it best in a speech he gave on July 4, 1962.1 Standing inside Independence Hall, the same place the founders gathered almost two centuries before, he said:

[The Declaration of Independence] was, above all else, a document not of rhetoric but of bold decision.  It was, it is true, a document of protest – but protests had been made before.  It set forth grievances with eloquence – but such eloquence had been heard before.  But what distinguished this paper from all the others was the final irrevocable decision that it took – to assert the independence of free States in place of colonies, and to commit to that goal their lives, their fortunes, and their sacred honor. 

That Declaration, whose yellowing parchment and fading, almost illegible lines I saw in the past week in the National Archives in Washington, is still a revolutionary document.  To read it today is to hear a trumpet call.  For that Declaration unleashed not merely a revolution against the British, but a revolution in human affairs.  Its authors were highly conscious of its worldwide implications, and George Washington declared [later]that liberty and self-government everywhere were, in his words, ‘finally staked on the experiment entrusted to the hands of the American people.’ 

This prophecy has been borne out.  For 186 years this doctrine of national independence has shaken the globe – and it remains the most powerful force anywhere in the world today.  There are those struggling to eke out a bare existence in a barren land who have never heard of free enterprise, but who cherish the idea of independence.  There are those who are grappling with overpowering problems of illiteracy and ill-health and who are ill-equipped to hold free elections.  But they are determined to hold fast to their national independence. 

In 1861, Abraham Lincoln spoke in this hall, [paying] a brief but eloquent tribute to the men who wrote, who fought for, and who died for the Declaration of Independence.  Its essence, he said, was its promise not only of liberty ‘to the people of this country, but hope to the world…hope that in due time, the weights should be lifted from the shoulders of all men, and that all should have an equal chance.’  

The theory of independence is old as man himself, and was not invented in this hall.  But it was in this hall the theory became practice; that the word went out to all, in Thomas Jefferson’s phrase, that “the God who gave us life, gave us liberty at the same time. 

When word first came out that the United Colonies were henceforth free and independent States, it didn’t stop at this country’s borders.  As if carried on the wind, it flew across oceans and over mountains.  It rang in valleys and swept across desert plains.  It penetrated walls and fortresses and iron curtains.  It launched revolutions and birthed democracies.  It was a trumpet call that reached every corner of the world – one that still echoes to this day.

When we celebrate the Fourth of July, we’re observing more than just our nation’s birthday.  We’re commemorating an event that shook the world off its old axis.  We’re participating in a grand, ongoing experiment.  An experiment to maintain, to protect, to uphold certain truths – that all people are created equal.

This Independence Day, take a moment to look over at your friends and family as they look to the skies.  And when the first glint of rockets reflects in their eyes, ask them if they hear it.  The word.  The prophecy.  The trumpet call.

Because there’s no sound more beautiful.

On behalf of all of us at Schwartz Financial, I wish you a safe and happy Independence Day!

1 “President Kennedy at Independence Hall, 4 July 1962,” John F. Kennedy Presidential Library & Museum.  https://www.jfklibrary.org/Asset-Viewer/RrjaDhW5B0OYm2zaJbyPgg.aspx

Regards,

Mike

Michael L. Schwartz, RFC®, CWS®, CFS

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.

This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

 

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

* Past performance does not guarantee future results.

 

* You cannot invest directly in an index.

 

* Consult your financial professional before making any investment decision.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.

Schwartz Financial Weekly Commentary 6/25/18

The Markets

What time is it?

The yield curve may be the pocket watch of economic indicators. It’s been around for a long time and it’s often right, but not always.

The yield curve is the difference between the interest paid on two-year government bonds and 10-year government bonds. In normal circumstances, an investor would expect to earn a higher rate of interest when lending money to a government for 10 years than when lending money for two years because there is more risk associated with lending for a longer period of time.

When the yield curve flattens or inverts, it suggests a shift in investors’ expectations. Financial Times explained:

“The slope made up of bond yields of various maturities has a record of predicting recessions that would make even the savviest econometrician turn pea-green with envy. It is not perfect, but the curve has become flat and inverted – when short-term bond yields are actually higher than long-term ones – ahead of most economic downturns in most major countries since the second world war.”

In the United States last week, the difference between yields on 2-year Treasuries (2.56) and 10-year Treasuries (2.90) flattened. The gap narrowed to 34 basis points (a basis point is one-hundredth of one percent). The change reflects higher short-term rates, courtesy of the Federal Reserve. It also suggests tariffs and trade issues have made bond investors more pessimistic about prospects for U.S. growth, reported The Wall Street Journal.

Globally, the yield curve is inverted. “The average yield of bonds in JPMorgan’s broadest Government Bond Index that mature in seven to 10 years last week slipped below the average yields of bonds maturing in one to three years for the first time since 2007…that indicates that investors have a pretty grim view of where the world economy and equity markets are heading,” reported Financial Times.

We’re keeping an eye on developments in the financial markets and will keep you informed.

 

Data as of 6/22/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.9% 3.0% 13.2% 9.1% 11.9% 7.7%
Dow Jones Global ex-U.S. -1.2 -3.8 6.5 2.2 4.9 0.5
10-year Treasury Note (Yield Only) 2.9 NA 2.1 2.4 2.6 4.2
Gold (per ounce) -1.3 -2.1 1.5 2.3 -0.3 3.7
Bloomberg Commodity Index -0.4 -1.0 10.0 -4.4 -7.1 -9.2
DJ Equity All REIT Total Return Index 2.4 0.3 3.4 7.8 9.7 7.9
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

You knew carrots were good for your eyes, and a newly discovered use for the orange veggie may help farmers and/or food processing companies find a new source of revenue. That’s because carrots can make concrete stronger – and so do sugar beets.

Engineers at Lancaster University in the United Kingdom are infusing nano platelets from discarded carrots and root vegetable peels into concrete. This strengthens the material in an environmentally friendly way. Durability + Design reported:

“These vegetable-composite concretes were also found to out-perform all commercially available cement additives, such as graphene and carbon nanotubes and at a much lower cost…The root vegetable nano platelets work both to increase the amount of calcium silicate hydrate – the main substance that controls the performance of concrete – and stop any cracks that appear in the concrete.”

The Economist reported adding 500 grams of platelets reduced the amount of cement required to make a cubic foot of concrete by 10 percent. In addition to reducing the amount of building material needed for a project, carrot concrete also reduces CO2 emissions.

Another natural material is getting a makeover, too. Researchers at the University of Maryland are refining processes that make wood stronger than steel, reported Scientific American. It may compete with titanium alloys and have applications beyond building:

“A five-layer, plywood-like sandwich of densified wood stopped simulated bullets fired into the material – a result Hu and his colleagues suggest could lead to low-cost armor. The material does not protect quite as well as a Kevlar sheet of the same thickness, but it only costs about 5 percent as much, he notes.”

If demand for carrots (and sugar beets and wood) increases and supply remains constant when we may see prices for those goods increase.

Weekly Focus – Think About It

“A person with a new idea is a crank until the idea succeeds.”

–Mark Twain, American author and humorist

Value vs. Growth Investing (6/22/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market -0.80 4.57 1.59 5.05 16.00 11.13 13.89
US Core -1.05 0.10 0.04 3.32 9.77 9.79 12.93
US Growth -0.67 14.22 4.58 8.75 27.22 14.03 17.43
US Large Cap -1.00 4.23 1.21 4.73 15.71 11.61 14.01
US Large Core -1.31 -0.74 -0.51 2.55 8.37 10.36 12.94
US Large Growth -0.95 14.14 4.01 7.97 27.39 14.91 18.32
US Large Val -1.05 -1.89 -0.85 1.64 10.06 8.99 10.40
US Mid Cap -0.52 4.66 2.22 4.85 15.89 9.79 13.69
US Mid Core -0.54 1.08 1.45 3.59 12.39 8.13 13.09
US Mid Growth -1.06 10.85 3.92 6.41 22.78 10.34 14.32
US Mid Val 0.09 1.98 1.10 4.49 12.30 10.77 13.57
US Small Cap 0.41 7.89 3.72 9.23 19.39 9.92 13.07
US Small Core 0.28 5.77 2.68 8.62 16.54 9.27 12.77
US Small Growth 0.04 14.52 5.22 9.59 26.65 11.60 14.63
US Small Val 0.94 3.54 3.17 9.45 15.09 8.70 11.69
US Value -0.68 -0.72 -0.18 2.75 10.92 9.36 11.16
2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

 Office Happenings:

Soul Surfer

On October 31, 2003, an aspiring professional surfer named Bethany Hamilton went onto the ocean near her home in Hawaii.  As she had done many times before, she lay down on her board and trailed her left arm through the warm water, watching nearby sea turtles.

That’s when the shark came.

Within seconds, what started as an idyllic day turned into a nightmare.  The shark attacked Bethany’s arm.  Some nearby friends pulled her from the water and fashioned a tourniquet before an ambulance arrived to rush her to the hospital.  Bethany’s father was already there, scheduled to have surgery that morning, but he promptly gave up his place in the operating room for his daughter.  To save her life, doctors were forced to amputate.

Why am I sharing this harrowing story?  That’s what I wondered when someone first shared it with me.  But the truth is, it’s not harrowing, but inspiring ­– because of what came after.

Whenever disaster happens, it would be perfectly normal and understandable for someone to “cut their losses” and move on.  But not Bethany.  The incident may have taken her arm, but it could not take her love of surfing.  She returned to the water less than a month later, surfing week after week on a modified board her father built.

Twenty months later, in June of 2005, she won her first national championship.

Today, experts consider her one of the top surfers in the world.

Bethany not only fulfilled her dream of becoming a professional surfer, but began sharing her story and outlook on life as a writer and inspirational speaker.  In interviews and her autobiography, Soul Surfer, her faith and can-do attitude inspired thousands.

Bethany’s story highlights how it’s possible to overcome almost any obstacle.  The trauma and loss of limb she suffered did not stop her from pursuing her passion.  If anything, it only drove her more.  It is this attitude that has made Bethany such an inspiration to so many.  Through determination and personal faith, Bethany achieved her dreams.  She also used adversity as a platform to raise money for disabled children.  Her foundation, Friends of Bethany, reaches out to amputees to provide the support they need to overcome adversity in their own lives.

As we travel on the road to our life goals, I hope we can remember Bethany’s example whenever adversity rears its ugly head.  I hope we can remember that on that road, adversity is a speed bump, not a stop sign.  Most of us will never experience what she did, but we will all experience times that will test our resolve.

When those times happen, remember Bethany – and get back in the water.

Regards,

Mike

Michael L. Schwartz, RFC®, CWS®, CFS

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

 

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.

 

This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

 

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

* Past performance does not guarantee future results.

 

* You cannot invest directly in an index.

 

* Consult your financial professional before making any investment decision.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.

Schwartz Financial Weekly Commentary 6/18/18

The Markets

Deal or no deal?

Last week opened with heightened trade tensions between the United States and its allies. It closed with the United States imposing new tariffs on $50 billion of Chinese goods. The Chinese declared it was the start of a trade war, reported Financial Times.

U.S. markets largely ignored the potential impact of trade wars on multiple fronts. Barron’s reported the Dow Jones Industrial Average, which includes companies that are vulnerable to tariffs, moved slightly lower. However, the Standard & Poor’s 500 Index shrugged off the possibility of trade wars, and the NASDAQ Composite gained more than 1 percent.

While Barron’s has written the largest risk to the U.S. stock market is the possibility of global trade wars, it appears many investors believe tariffs are a negotiating tactic. Barron’s reported:

“The market’s apparent indifference suggests it doesn’t see these tariffs as the reincarnation of Smoot-Hawley, but just the latest in President Trump’s negotiating tactics. Moving away from his denunciation of Kim Jong-un as “Little Rocket Man” inviting “fire and fury” by missile launches, Trump last week declared the threat from North Korea neutralized. Similarly, many professional investors view the bluster on tariffs as part of Trump’s negotiating tactics, rather than the start of an actual trade war.”

News that monetary policy is becoming less accommodating in certain regions of the world didn’t have much impact on markets either. Reuters reported the Federal Reserve raised its benchmark rate 0.25 percent last week. The European Central Bank is ending its bond-buying program and gave notice it expects to begin raising rates next summer. The Bank of Japan is still easing.

There was a lot of red ink in Asian emerging markets. China’s Shanghai Composite finished the week lower, as well. However, stock markets in Canada and Mexico finished the week higher.

 

Data as of 6/15/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.0% 4.0% 14.3% 10.1% 11.1% 7.4%
Dow Jones Global ex-U.S. -1.0 -2.6 8.3 3.4 3.8 0.4
10-year Treasury Note (Yield Only) 2.9 NA 2.2 2.4 2.2 4.2
Gold (per ounce) -1.0 -0.9 2.5 2.9 -1.5 3.8
Bloomberg Commodity Index -2.5 -0.5 8.4 -4.4 -7.7 -9.1
DJ Equity All REIT Total Return Index -0.7 -2.0 0.3 7.5 7.9 6.9
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

sorry America, you’re not in the tournament. If you’ve been watching the World Cup – the global soccer championship – you’ve probably seen the commercials entreating Americans to root for another country since we don’t have a team playing. The ads offer encouragements like, “Iceland could really use your support. We don’t have enough people to do the wave,” and “Cheer for Germany. We gave you the frankfurter!”

If you haven’t already chosen a favorite team, you may want to consider (or not) the insight of economists before making your choice. Since the demise of Paul, the octopus that successfully predicted winners during the 2010 final, various firms’ economists have offered opinions about this year’s possible winner. Financial Times reported:

  • Multinational analysts at a Japanese bank concluded “…using portfolio theory and the efficient-markets hypothesis as well as data on the value, form, and historical performance of players, that France will beat Spain in the final, with Brazil in third place.”
  • A German bank predicted Germany will win, and so did a Swiss bank that relied on unspecified econometric tools to determine that Germans have a 24 percent chance of victory.
  • A Dutch bank concluded Spain will be the big winner.

Perhaps the most interesting analysis was done by the Toulouse School of Economics, which employed automated face-reading software on World Cup sticker albums from the 1970s through the present. They found teams that did better in the group stage had players who looked happier or angrier on the stickers. Happiness showed confidence and anger led to fewer goals allowed.

Weekly Focus – Think About It

“Winning is great, sure, but if you are really going to do something in life, the secret is learning how to lose. Nobody goes undefeated all the time. If you can pick up after a crushing defeat, and go on to win again, you are going to be a champion someday.”

–Wilma Rudolph, American sprinter and Olympic champion

Value vs. Growth Investing (6/15/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 0.15 5.41 3.04 2.14 16.98 12.12 13.57
US Core -0.27 1.16 1.90 0.48 10.97 10.84 12.73
US Growth 1.26 14.99 5.64 5.33 28.96 15.16 17.02
US Large Cap 0.04 5.28 2.78 1.60 17.16 12.65 13.76
US Large Core -0.27 0.58 1.48 -0.22 10.28 11.51 12.85
US Large Growth 1.10 15.23 5.38 4.74 29.56 16.11 17.96
US Large Val -0.86 -0.85 0.88 -0.80 10.65 9.86 10.16
US Mid Cap 0.48 5.20 3.44 2.73 15.95 10.74 13.22
US Mid Core 0.06 1.63 3.02 1.22 12.04 8.97 12.58
US Mid Growth 1.43 12.04 5.52 4.73 24.48 11.67 14.01
US Mid Val -0.17 1.89 1.61 2.12 11.19 11.42 12.97
US Small Cap 0.36 7.45 4.57 6.18 18.19 10.55 12.48
US Small Core -0.18 5.48 3.96 5.36 14.77 9.78 12.17
US Small Growth 1.82 14.47 5.57 7.25 28.27 12.75 14.32
US Small Val -0.67 2.58 4.12 5.87 11.79 8.94 10.83
US Value -0.70 -0.04 1.26 0.26 10.91 10.15 10.80
2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

 Office Happenings:

This is an incredible #Fact” In 2016, roughly 12.8% of the American population was disabled. And roughly half of those people were working age. Do you have disability insurance and if you do is it enough?  If not contact my office. #disabilityinsurance

Here is a story you may have seen before in this column:

“barrel of bricks”

Consider this humorous accident report from someone who should have considered disability insurance sooner.

I am writing in response to your request for additional information on my accident report.  In block number three of the accident reporting form I wrote, “Trying to do the job alone,” as the cause of my accident.  You said in your letter that I should explain more fully and I trust the following details will be sufficient.

I am a bricklayer by trade.  On the day of the accident I was working alone on the roof of a new six-story building.  When I completed my work I discovered that I had about 500 pounds of brick left over.  Rather than carry the bricks down by hand, I decided to lower them in a barrel by using a pulley, which fortunately was attached to the side of the building at the sixth floor.

Securing the rope at ground level, I went up to the roof, swung the barrel out, and loaded the bricks into it.  Then I went back to the ground level and untied the rope, holding tightly to it to ensure a slow decent of the 500 pounds of brick.  You will note in block eleven of the accident report that I weigh 135 pounds.

Due to my surprise at being jerked off the ground so suddenly, I lost my presence of mind and forgot to let go of the rope.  Needless to say, I proceeded at a rather rapid rate up the side of the building.

In the vicinity of the third floor I met the barrel coming down.  This explains the fractured skull and broken collarbone.

Slowing down slightly, I continued my rapid ascent, not stopping until the fingers of my right hand were two knuckles deep into the pulley.  Fortunately, by this time I had regained my presence of mind and was able to hold tightly to the rope in spite of my pain.

At approximately the same time, however, the barrel of bricks hit the ground and the bottom fell out of the barrel.  Devoid of the weight of the bricks, the barrel now weighed approximately 50 pounds.  I refer you again to my weight in block eleven.  As you might imagine, I began a rapid decent down the side of the building.  In the vicinity of the third floor I met the barrel coming up.  This accounts for the two fractured ankles and the lacerations of my legs and lower body.

The encounter with the barrel slowed me enough to lessen my injuries when I fell onto a pile of bricks and, fortunately, only three vertebrae were cracked.

I am sorry to report, however, that as I lay there on the bricks in pain, unable to stand, and watching the empty barrel six stories above me I again lost my presence of mind.  I let go of the rope.

Moral of this tale: #It doesn’t pay to try to do the job alone.

Give our office a call at 215-886-2122 for more information or a second opinion quote.

PUB8547WEBP

Regards,

Mike

Michael L. Schwartz, RFC®, CWS®, CFS

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

 

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.

 

This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

 

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

* Past performance does not guarantee future results.

 

* You cannot invest directly in an index.

 

* Consult your financial professional before making any investment decision.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.

 

Schwartz Financial Weekly Commentary 6/11/18

The Markets

G whiz!

Never before could the Group of 7 (G7) Summit have been mistaken for reality TV.

The generally dignified annual meeting of leaders from the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom (along with the heads of the European Commission and European Council) was a lot more contentious than usual, reported Reuters.

Disagreements about trade were the reason for heightened tensions among world leaders. At the end of May, the United States extended tariffs on aluminum and steel imports to U.S. allies. They had previously been exempted. These countries “account for nearly two-thirds of the [United States’] $3.9 trillion annual merchandise trade,” reported The Washington Post.

Retaliation to U.S. sanctions was fast and furious. Mexico implemented “…a 20 percent tariff on U.S. pork legs and shoulders, apples, and potatoes and 20 to 25 percent duties on types of cheeses and bourbon,” reported Reuters.

Canada imposed $16.6 billion in tariffs on U.S exports of “…steel and aluminum in various forms, but also orange juice, maple syrup, whiskey, toilet paper, and a wide variety of other products,” says Reuters.

The European Union has a 10-page list of goods targeted for sanctions, including bourbon and motorcycles, reported The Washington Post. Complaints that U.S. tariffs are illegal also are being filed with the World Trade Organization.

Difficult relationships with allies are “expected to complicate U.S. efforts to confront China over trade practices that the administration regards as unfair,” reports The Washington Post.

Canadian, Mexican, and U.S. stock markets remained unfazed. Major indices in each country moved higher last week. Some American indices reached new highs. European markets fared less well. Markets may be bouncier this week as investors digest the costs and benefits of trade sanctions.

 

Data as of 6/8/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.6% 3.9% 14.2% 11.1% 10.8% 7.4%
Dow Jones Global ex-U.S. 0.8 -1.6 8.7 3.7 4.0 0.2
10-year Treasury Note (Yield Only) 2.9 NA 2.2 2.4 2.2 4.0
Gold (per ounce) 0.3 0.1 2.0 3.5 -1.3 3.8
Bloomberg Commodity Index -0.5 2.1 9.5 -3.7 -7.2 -8.6
DJ Equity All REIT Total Return Index 1.1 -1.4 3.3 7.7 8.1 7.2
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

the struggle is real. Millennials are known – and often disparaged – for being innovators and disrupters. According to Business Insider, the generation has been credited with ‘killing’ everything from starter homes to napkins. There’s a reason for that. Millennials are the biggest generation and have become the world’s most powerful consumer group, reports Financial Times:

“The coming of age of the world’s 2bn millennials is not only a generational shift, it is one of ethnicity and nationality. Forty-three percent of U.S. millennials are non-white, and millennials in Asia vastly outnumber those in Europe and the U.S. Despite China’s former one-child policy, it has 400m millennials, more than five times the U.S. figure (and more than the entire U.S. population) while Morgan Stanley estimates that India’s 410m millennials will spend $330bn annually by 2020.”

Millennials have different buying habits and preferences than previous generations. They opt for access rather than ownership, reports Goldman Sachs, which has helped fuel the growth of the gig economy’s sharing services.

As the first digital natives, Millennials also tend to favor brands that offer the greatest convenience at the lowest price. The most successful brands have strong social media presence.

Weekly Focus – Think About It

“Millennials are more aware of society’s many challenges than previous generations and less willing to accept maximizing shareholder value as a sufficient goal for their work. They are looking for a broader social purpose and want to work somewhere that has such a purpose.”

–Michael Porter, Harvard Business School Professor

Value vs. Growth Investing (6/8/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 1.70 5.25 4.35 2.33 16.78 12.18 13.32
US Core 1.74 1.44 3.45 0.79 11.16 11.06 12.60
US Growth 1.60 13.55 5.46 4.94 26.04 14.75 16.45
US Large Cap 1.64 5.24 4.42 1.93 17.02 12.76 13.52
US Large Core 1.64 0.85 3.29 0.04 10.29 11.75 12.71
US Large Growth 1.75 13.98 5.51 4.63 26.64 15.74 17.39
US Large Val 1.72 0.01 4.01 0.12 13.05 10.36 10.17
US Mid Cap 1.91 4.70 3.79 2.52 15.68 10.64 12.95
US Mid Core 1.81 1.58 3.33 1.33 12.35 8.98 12.43
US Mid Growth 2.09 10.46 4.70 3.93 22.34 11.26 13.44
US Mid Val 1.82 2.07 3.26 2.26 12.16 11.59 12.91
US Small Cap 1.65 7.07 5.32 6.03 17.54 10.63 12.25
US Small Core 2.09 5.67 5.02 5.67 15.17 10.09 11.99
US Small Growth 0.89 12.43 4.80 5.91 24.15 12.26 13.86
US Small Val 2.04 3.27 6.21 6.55 13.35 9.37 10.82
US Value 1.77 0.67 4.00 1.00 12.95 10.57 10.80
2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

 Office Happenings:

Is Your Spouse in Your Investment Loop?

In an interview on MsMoney.com, Kerry Hannon, author of Suddenly Single: Money Skills for Divorcees and Widows, said she wrote her latest book after seeing loved ones face financial difficulties after becoming widowed or divorced.

“Some didn’t even know where their investments, insurance policies and the like were, or have a grip on their cost of living,” Hannon told MsMoney.com.

Being clueless about the family finances isn’t a gender issue. Plenty of men rely on their wives to pay bills, put money aside for savings and retirement, and keep important documents safely stored.

If you’re the one responsible for the household investing and finances, you need to make sure you are keeping your spouse in the loop. That includes:

  • Knowing the names, firms and phone numbers for key advisors including your investment manager, accountant and estate attorney.
  • Knowing where key documents, such as insurance policies, copies of your wills and investment account statements, are stored.
  • Having an overall idea of your financial situation.
  • Knowing where all banking and investment accountants are held.

Even a non-working spouse should have an estate plan that includes cash and investments, real estate and insurance proceeds. If one spouse does not work, the working spouse should have not only life insurance but disability insurance. Life insurance on the non-working spouse can also help offset costs such as childcare that may be needed after her death.

If you have an elderly parent who is widowed or divorced, you may want to have the same discussion (although it may be more difficult than with a spouse.) If a parent plans to leave a sizable estate to a child, it’s important that the heir know where documents have been kept and which key advisors to contact.

If you have trouble figuring out what your spouse does and does not need to know, ask yourself this question: If tomorrow I were killed in an accident, what would my spouse need to know to ensure the family could survive financially?

Regards,

Mike

Michael L. Schwartz, RFC®, CWS®, CFS

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

 

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.

 

This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

 

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

* Past performance does not guarantee future results.

 

* You cannot invest directly in an index.

 

* Consult your financial professional before making any investment decision.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.

 

Schwartz Financial ­Weekly Commentary 6/4/18

The Markets

If the countries were instruments, last week sounded like a fifth grade garage band.

World markets were buffeted by a clamor of good, bad, and unexpected news last week. Events that captured media and investor attention included:

  • Taxing America’s allies. Early in the week, investors weren’t the only ones riled by the administration announcement it would impose hefty trade tariffs on American allies. “Brussels’ top trade official vowed to respond to Donald Trump’s new tariffs on imports of steel and aluminum from the EU, Canada, and Mexico with measures of its own, and warned that the EU has “closed the door” on trade talks with the U.S.”
  • Breaking protocol. A strong unemployment report helped settle volatility stirred up by tariff talk. However, a preemptive Presidential tweet introduced controversy. “While not breaking the 8:30 a.m. EDT embargo on the actual numbers, Trump’s tweet appeared to violate a 1985 federal rule barring members of the executive branch from commenting on the employment report until one hour after the release of the report in order to avoid affecting ‘financial and commodity markets,’” reported Barron’s.
  • Counting chickens. Although the summit with North Korea is on the calendar again, the commemorative Korea Peace Talks Coin is selling at a 20 percent discount in the White House gift shop.
  • Puzzling choices. Giuseppe Conte is Italy’s new Prime Minister. He has a tough job ahead. Despite electing “…western Europe’s first anti-establishment government bent on overhauling European Union rules on budgets and immigration,” Italians aren’t keen on leaving the euro behind. Last week, “…opinion polls…showed between 60 and 72 percent of Italians did not want to abandon the euro,” reported Reuters.

Despite the noise, the Standard & Poor’s 500 Index and NASDAQ forged ahead last week. That may have something to do with valuations. Barron’s wrote, “…the S&P 500…now trades at 16.5 times 12-month earnings estimates, down from 18.2 at the beginning of the year…”

Data as of 6/1/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.5% 2.3% 12.5% 9.0% 10.8% 7.0%
Dow Jones Global ex-U.S. -0.8 -2.4 7.7 2.9 3.7 -0.1
10-year Treasury Note (Yield Only) 2.9 NA 2.2 2.2 2.1 4.0
Gold (per ounce) -0.7 -0.2 2.4 2.6 -1.6 3.8
Bloomberg Commodity Index -0.5 2.6 9.7 -3.6 -7.3 -8.3
DJ Equity All REIT Total Return Index 2.0 -2.4 2.5 6.1 7.5 6.8
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

it’s water under the bridge. Water is so common we tend to take it for granted. We drink it, cook with it, wash with it, swim in it, and rarely give it much thought. We should, though, because fresh water is more rare than many people realize. According to National Geographic, “Over 68 percent of the fresh water on Earth is found in icecaps and glaciers, and just over 30 percent is found in ground water. Only about 0.3 percent of our fresh water is found in the surface water of lakes, rivers, and swamps.” Here are some other notable facts about water:

  1. Our planet is mostly H2O. However, more than 96 percent of the water on Earth is salt water.

 

  1. The atoms in the water you drink today were around when dinosaurs roamed the Earth.

 

  1. Water is the only compound on earth that can be found naturally in three forms – solid, liquid, and gas.

 

  1. The average person in the United States uses 80 to 100 gallons of water each day, according to the U.S. Department of Interior’s estimates.

 

  1. Thermal power plants generate the majority of the world’s electricity – more than 81 percent – and cannot run without water.

 

  1. ‘Day Zero’ is the day Cape Town, South Africa will become the first major metropolis to run out of water. When it arrives, residents will receive rations of seven gallons a day.

Fresh water may soon be top of mind for everyone because it is rapidly becoming a scarce resource.

McKinsey & Company estimates suggest current water supplies will meet just 60 percent of global demand by 2030. The fraction may be lower in countries like China, India, and South Africa where water supplies are already under stress.

Weekly Focus – Think About It

“To find the universal elements enough; to find the air and the water exhilarating; to be refreshed by a morning walk or an evening saunter…to be thrilled by the stars at night; to be elated over a bird’s nest or a wildflower in spring – these are some of the rewards of the simple life.”

–John Burroughs, American Naturalist

Value vs. Growth Investing (5/31/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market -0.64 2.41 2.72 0.89 14.89 10.74 12.86
US Core -1.15 -1.16 2.31 -0.80 9.46 9.67 12.19
US Growth 0.22 10.24 4.64 3.98 24.15 13.31 15.87
US Large Cap -0.72 2.37 2.65 0.03 15.02 11.25 13.10
US Large Core -1.30 -1.65 2.02 -1.85 8.71 10.31 12.39
US Large Growth 0.03 10.52 3.89 2.97 24.40 14.17 16.80
US Large Val -1.25 -2.65 0.80 -2.08 10.82 8.82 9.81
US Mid Cap -0.70 1.87 2.01 1.97 13.51 9.25 12.39
US Mid Core -0.93 -1.06 1.54 0.34 9.96 7.65 11.82
US Mid Growth -0.15 6.95 4.06 3.90 20.14 9.86 12.76
US Mid Val -1.06 -0.27 0.33 1.64 10.35 10.14 12.54
US Small Cap 0.27 4.43 5.60 7.08 17.65 9.76 11.70
US Small Core 0.11 2.92 4.89 6.29 15.06 9.22 11.45
US Small Growth 0.58 10.00 6.81 8.64 25.39 11.72 13.39
US Small Val 0.11 0.52 5.05 6.26 12.55 8.19 10.16
US Value -1.12 -1.94 0.99 -0.76 10.91 9.08 10.41
2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

 Office Happenings:

Man vs. Machine

Look: There are few decisions more important than choosing where you turn for help in managing your money.  Achieving your goals in life often depends on getting the most out of your finances.

These days, you have three main options:

  1. Decline any help and go it alone.
  2. Use a digital “robo-advisor”.
  3. Partner with an expert financial advisor.

Let’s look at each option one by one.

Do It Yourself

The advantage of doing all your investing and financial planning yourself is simple: control.

But here’s the thing – unless you want to devote hundreds of hours of your life to monitoring your investments, researching the tax code, or constructing a painstakingly thorough plan for reaching your goals, “doing it yourself” is out.  So that leaves using a robo-advisor or partnering with an expert.

Use a Digital “Robo-Advisor”

You’ve probably heard about robo-advisors before.  A robo-advisor is “a digital platform that provides automated, algorithm-driven financial services with little to no human supervision.”  It can invest your assets according to a specific strategy and handle investment selection, asset allocation, rebalancing, and other tasks with little to no supervision.

With a robo-advisor, you’re essentially hiring a computer to help you reach your goals.  And make no mistake, robo-advisors come with some definite perks.  For one thing, the best robo-advisors were designed by some very intelligent minds.  A lot of research has gone into investing over the decades, and it’s this research that many robo-advisors are built on.  If you hire a robo-advisor, you’re taking advantage of a lot of brain power.  Using a robo-advisor can be easy, too.  Every decision you make, every interaction you have – these days, it can all be done on your phone.

On the other hand…

No algorithm, no matter how sophisticated, can answer your questions.  No algorithm can hold your hand and help keep your emotions in check during a bear market.  And there’s more to reaching your financial goals than mere investing.  There’s tax planning, estate planning, cash flow, you name it – all important, all far beyond what an algorithm can handle.

Partner with an Expert Financial Advisor

For all their computing power, robo-advisors don’t do what human advisors do: provide advice. 

Here’s what I mean.  Take a moment to think about the goals you have in life.  They could be anything.  For instance, here are some of the few my clients have expressed to me over the years:

 

  • Start a new business
  • Raise horses
  • Learn how to cook Italian food…in Italy
  • Support local charities & causes
  • Design and build your own house
  • Work for human rights for people in third world countries
  • Build your collection of fine wines
  • Play as many rounds of golf as possible
  • Enjoy a lifestyle based on nothing but a hammock, a glass of lemonade, and a stack of Agatha Christie novels
  • Visit every national park in the USA
  • Go back to college and get a degree
  • Invest in startup companies you believe will change the world
  • Take care of your parents
  • Spend time with grandchildren

 

How do you achieve these goals?  How do you invest, structure your finances, and save on taxes so you can afford them?  How do you overcome obstacles that stand in your way?  How do you change your strategy if your goals or needs change?  What are the exact steps that will get you where you want to go?

Only an expert financial advisor can truly help you answer those questions.  Only a financial advisor can understand who you are, what you want, and why you want it.

Now, there are potential downsides to hiring a traditional advisor, too.  For one thing, not every advisor is great at what they do.  And there’s always the possibility of working with someone, only to find they’re just not the right fit.  And unlike a robo-advisor, a traditional advisor can’t operate through your mobile device 24/7.  After all, a traditional advisor is human, like you.

So, who should you turn to?  The answer: It depends.  On your specific goals, needs, and preferences.  It depends on you.  You may already have your own opinions, so what I’m offering, is a second opinion.  Here at Schwartz Financial, we offer a special Second Opinion Service to help people like you determine your best option.  We’ll sit down with you, offer a cup of coffee, and go over your specific financial situation.  In some cases, we recommend hiring an expert financial advisor.  In other cases, we don’t.  In the end, it’s your decision.  Best of all?  A second opinion comes with no obligation, takes only a few minutes, and is absolutely FREE!

Managing your money is a critical part of life.  So is choosing who you turn to for help.   To schedule your free second opinion, please give us a call at 215-886-2122.  It’s quick, it’s easy…and the benefits last a lifetime.

Regards,

Mike

Michael L. Schwartz, RFC®, CWS®, CFS

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

 

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.

 

This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

 

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

* Past performance does not guarantee future results.

 

* You cannot invest directly in an index.

 

* Consult your financial professional before making any investment decision.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.

Schwartz Financial Weekly Commentary 5/21/18

The Markets

Too much? Too little? Or just right?

U.S. stock markets were relatively calm, although they finished the week lower. U.S. Treasury yields hit a 7-year high and finished the week above 3 percent. While these were notable, the most remarkable events last week occurred beyond our borders. These include:

  • The Vatican publishing a position paper on financial markets. Its opening was, “Economic and financial issues draw our attention today as never before because of the growing influence of financial markets on the material well-being of most of humankind. What is needed, on the one hand, is an appropriate regulation of the dynamics of the markets and, on the other hand, a clear ethical foundation that assures a well-being realized through the quality of human relationships rather than merely through economic mechanisms that by themselves cannot attain it.”
  • The royal wedding boosting the British economy. A normal Britain wedding costs about £18 thousand and includes about 80 guests. Prince Harry’s nuptials were a bit more lavish. A wedding planning company estimated the cost of hosting 600 or more guests at £32 million ($43 million in U.S. dollars). The largest component of the cost was £30 million for security, which included drone destroyers.
  • Venezuela’s oil-based economy continuing to collapse as oil prices rise. “Venezuela leads the world in two things: oil reserves and incompetence,” opined The Washington Post. Poor management of the state-run oil industry has caused production to drop 23 percent since December. The country’s declining production helped push oil prices higher last week. Prices are at levels last seen in 2014, reported Financial Times. Regardless of the country’s economic woes, this weekend’s election is not expected to oust President Nicolás Maduro.

Rising oil prices have pushed the cost of gas higher, but that’s not expected to deter Memorial Day travelers, according to USA Today. We wish you safe travels during the holiday weekend.

 

Data as of 5/18/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.5% 1.5% 14.7% 8.4% 10.2% 6.6%
Dow Jones Global ex-U.S. -0.9 -0.5 11.9 2.7 3.2 -0.2
10-year Treasury Note (Yield Only) 3.1 NA 2.2 2.2 2.0 3.8
Gold (per ounce) -2.7 -0.6 2.6 1.7 -1.0 3.6
Bloomberg Commodity Index 0.4 2.5 8.4 -4.9 -7.4 -8.3
DJ Equity All REIT Total Return Index -3.0 -6.5 -0.4 4.3 4.8 5.9
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

did you know there’s a billionaire census? Last week, the fifth edition of the Billionaire Census was released. Apparently, the wealth of billionaires increased by 24 percent during 2017. In addition, the billionaire population, which had suffered reduced numbers since 2015, expanded. It now includes 2,754 individuals. The previous high was 2,473 in 2015. According to Wealth-X:

  • 816 live in the Asia-Pacific region
  • 884 live in the Americas
  • 1,054 live in Europe, the Middle East, and Africa

There is a bit of disagreement about the size of the ‘Three-Comma Club’ and the rate at which its wealth is increasing. In March 2018, Forbes reported there were “…2,208 billionaires from 72 countries and territories including the first ever from Hungary and Zimbabwe. This elite group is worth $9.1 trillion, up 18 percent since last year. Their average net worth is a record $4.1 billion. Americans lead the way with a record 585 billionaires, followed by Mainland China with 373.”

Two hundred and fifty-six women made the list, including 42 new additions.

The Giving Pledge is another exclusive group that some billionaires have joined. The objective of the Pledge is to “…help address society’s most pressing problems by inviting the world’s wealthiest individuals and families to commit more than half of their wealth to philanthropy or charitable causes either during their lifetime or in their will.”

As of February 2018, 175 billionaires from 22 countries had joined.

Weekly Focus – Think About It

“Philanthropy is almost the only virtue which is sufficiently appreciated by mankind.”

–Henry David Thoreau, American essayist and naturalist

Value vs. Growth Investing (5/18/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market -0.34 2.55 0.51 0.27 17.32 10.44 12.41
US Core -0.21 -0.32 0.58 -1.14 12.73 9.60 11.86
US Growth -0.65 9.15 1.38 3.26 25.97 12.55 15.05
US Large Cap -0.55 2.48 0.41 -0.29 17.54 10.96 12.64
US Large Core -0.29 -0.60 0.39 -1.70 12.43 10.32 12.16
US Large Growth -0.63 9.63 1.02 2.86 26.79 13.52 15.98
US Large Val -0.40 -1.90 -0.90 -2.47 12.95 8.86 9.64
US Mid Cap -0.04 2.29 0.22 0.89 16.18 8.99 11.91
US Mid Core -0.19 -0.77 -0.21 -1.07 12.46 7.42 11.18
US Mid Growth -0.22 6.93 0.92 3.19 22.28 9.27 12.21
US Mid Val 0.32 0.73 -0.11 0.50 13.71 10.20 12.27
US Small Cap 1.00 4.08 2.55 4.44 18.30 9.24 11.28
US Small Core 0.75 2.67 2.39 3.33 15.48 8.74 10.93
US Small Growth 0.78 9.84 2.82 7.15 27.17 11.37 13.09
US Small Val 1.50 -0.11 2.43 2.78 12.41 7.46 9.74
US Value -0.12 -1.23 -0.51 -1.50 13.13 9.07 10.21
2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

 Office Happenings:

Last month, I started a new series of monthly articles called “BACK TO BASICS.” Each month, we will examine one of the basics of financial planning. This month, let’s look at:

Back to Basics #2:

Asset Allocation

______________________________________________________

When it comes to investing, there’s a lot of terminology and jargon you might see bandied about by financial professionals or the media. Most of these terms are not hard to understand – but they may seem baffling at first glance.

Understanding some basic investing terms is helpful, because it can help transform investing from some arcane art into a simple process. And the more you see investing as a process based on rules and logic, rather than something based on emotions, the more likely you will find success.

One important term every investor shoulder understand is asset allocation. Improper asset allocation is one of the most common mistakes an investor can make. Why is asset allocation so important? Look at it this way: If you were to eat only one food every day for your entire life, your body would be very unhealthy. If you were to exercise only one group of muscles for your entire life, your body as a whole would be very weak. And when you invest all your money in the same way, the same could be true of your finances.

Asset allocation is basically a strategy that spreads your investments across different “asset classes.” The three main classes are equities (stocks), fixed income (bonds), and cash. There are other classes, of course, like commodities and real estate. And there are sub-classes as well. For example, “stocks” can be divided up into many different classes, like international stocks, small, mid, and large-cap stocks, etc.

The thinking behind asset allocation is that by mixing your investments within these different classes, you take on less risk. That’s because if one class goes down in value, the other classes you’ve invested in can compensate.

Here’s an example of why asset allocation is so important. Let’s say that in Year 1, the stock market goes through the roof. So you put all your money into stocks. But in Year 2, the stock market performs poorly. It’s possible you could end up losing a lot of money.

Now let’s say that instead of putting all of your money into stocks, you put 50% into the bond market. When the stock market went down, investors started pouring their money into bonds, causing bond prices to go up. That means that even though your stock holdings decreased in value, your bond holdings increased, meaning you could still break even or possibly come out ahead.

Of course, this is a very general, very simplified example. I’m certainly not recommending you do anything like that. (I would never recommend any particular investment or strategy to anyone without first sitting down and learning more about their goals, needs, challenges, and fears.) But hopefully it illustrates the point: Putting all your eggs in one basket is rarely a good idea.

Next month, we’ll continue the series by looking at another important investment term everyone should understand. In the meantime, have a great month!

Regards,

Mike

Michael L. Schwartz, RFC®, CWS®, CFS

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

 

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.

 

This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

 

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

 

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

 

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

 

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

* Past performance does not guarantee future results.

 

* You cannot invest directly in an index.

 

* Consult your financial professional before making any investment decision.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.