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Market downturns have a way of grabbing attention and fueling anxiety amongst investors. However, “long-term investors should not worry, and instead see opportunity, ” writes Lewis Walker, president of Walker Capital Management LLC. “Market downturns are times to buy good bargain stocks. Think back to early March 2009, the low point after the crash. America was on sale. If you bought stocks then, when they were cheap, you more than doubled your money as of now. “
Although financial pundits offer a variety of reasons for a market downturn, Walker believes “a simple explanation for the fall perhaps is the most rational of all — that’s what markets do, periodically.”
What Investors Can Learn From Natural Disasters (The BlackRock Blog)
According to Russ Koesterich, chief investment strategist for BlackRock and iShares chief global investment last week’s Napa Valley earthquake “was a violent, but good, metaphor for the dangers lurking in financial markets.”
For Koesterich, a decade-long Bay Area resident, the earthquake was a stark reminder of the risks in living in the region. He equates this experience with financial markets in that “stocks and other risky assets have been doing particularly well the last few years. So well, in fact, that it’s easy to forget there are risks below the surface. While I continue to believe that equities and other risky assets can advance further this year, it’s worth considering what to do when the next shock hits financial markets.”
Active Management Is Still The Way To Go In Investing (Advisor Perspectives)
As media outlets herald the rise of passively-managed investment vehicles, William Smead, chief executive and chief investment officer for Smead Capital Management believes that actively managed investing should still be the preferred method.
Smead writes, “financial advisors and registered investment advisors feel severe pressure to throw in the towel on manager selection methodologies and accept index returns. Yet, many of these stories forget one central concept: indexes are actually inexpensive actively-managed portfolios. Every actively managed fund is an index itself.”
He adds, “the recent negativity towards active management invites us to remind readers what we find useful in indexed common stock investing versus the value we find in active management. Under the logic pervaded by the crowd and the media, many managers and organisations are practicing poor performing versions of active management and investors are told, or being shamed into giving up on all efforts to actively manage a common stock portfolio.”
The 4% Rule For Annuity Withdrawals May No Longer Be Viable (Financial Planning)
Traditionally, withdraws from annuities were done based on the 4% rule. Under the rule, explains financial writer Donald Jay Korn, “a retiree can start by withdrawing 4% of accumulated savings, raise withdrawals to match inflation and, with certain assumptions, be fairly confident the money will last for 30 years.”
“Recent studies indicate the 4% rule may have a high failure rate given today’s low interest rates,” says Ric Runestad, who heads a financial services firm in Fort Wayne, Ind. “The possibility of repeated bear markets adds to the risk of this regimen, as inflation-expanded withdrawals could speed asset depletion,” adds Korn.
Here’s What Is Happening In Market Today (Charles Schwab)
“The stock market continues to exhibit great resiliency, with bouts of selling this year stopping short of a correction, and reversing quickly, ” writes Charles Schwab chief investment strategist Liz Ann Sonders, director of market and sector analysis Brad Sorenson, and director of international research Michelle Gibley . Although, “stocks suffered a quick 4-5% decline,” they recovered fairly rapidly and move to new highs,” added the team at Schwab. In addition, longer-term interest rates labored higher only to plunge again.
“We remain optimistic about stocks for the foreseeable future, although we would prefer the kind of grind-higher market we’ve experienced recently over a melt-up,” concluded the trio. “We would also welcome pullbacks and even a correction as it would keep sentiment contained; and could elongate the bull market. “
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