Reminder: Headlines Are Framed to Frighten – Not Enlighten
If we’ve been doing our job as your fiduciary advisor, you might already be able to guess what our take is on the current market news: Unless your personal goals have changed, stay the course according to your personal plan.
Still, it never hurts to repeat this advice during periodic market downturns. We understand that thinking about scary markets isn’t the same as experiencing them.
So, what’s going on? Why have stock prices suddenly become volatile after such a long, lazy lull, with no obvious calamity to have set off the alarms? While we could point out fears of inflation, interest rate movements, and other potential reasons, we can’t (and no one can) know for sure what exactly moves markets on any given day, and this does not inform us of what will happen next. > SEE MORE
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Waypoint Wealth Management
Your Retirement Plan Doesn’t Care About January
Have you heard of the “January Indicator” or “January Barometer?” This theory suggests that the price movement of the S&P 500 during the month of January may signal whether that index will rise or fall during the remainder of the year. In other words, if the return of the S&P 500 in January is negative, this would supposedly foreshadow a fall for the stock market for the remainder of the year, and vice versa if returns in January are positive.
I’ve heard this for years. And I can remember early on in my career probably giving it too much attention. After all, the financial news loves soundbites, and this was one that could grab viewer’s attention as we wonder about the upcoming year. But what does the evidence show us? Have past Januarys’ S&P 500 returns been a reliable indicator for what the rest of the year has in store? More importantly, should we care or worry about it? > SEE MORE
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Waypoint Wealth Management
Understanding ‘Average’ Returns
The US stock market has delivered an average annual return of around 10% since 1926.[1] But short-term results may vary, and in any given period stock returns can be positive, negative, or flat. When setting expectations, it’s helpful to see the range of outcomes experienced by investors historically. For example, how often have the stock market’s annual returns actually aligned with its long-term average? > SEE MORE
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Waypoint Wealth Management
Our Brain And Our Behavior, Part Three
Do you ever do something based on a recent experience, even though you know it might not be the best choice? Or do you ever think to yourself “you know, I’m a better driver than most”? How about watching the market’s movements and subtly measuring your diversified portfolio’s recent returns against a very narrow comparison such as the general market? If you’re like most of us and answered yes to any of these, we’re going to explore how these behaviors can potentially take us off track when it comes to our finances.
This is the final article in our three-part series, where we’ve been exploring the most common ways that our brains can be wired to help us in life—but also can hurt us as investors. > SEE MORE
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Waypoint Wealth Management
Our Brain And Our Behavior, Part Two
Little did we know when we started this series last month that it would be announced the Nobel Prize in Economics would go to Richard Thaler. You may not have heard of him, but he is one of three behavioral economists who can claim credit to the award in the last fifteen years. If you remember being automatically enrolled in your company’s 401(k) program instead of signing up on your own, you can give thanks to Richard Thaler. He and many others are helping us to understand why we as humans do the things that we do so that we can better understand ourselves and hopefully improve our financial (and life) habits.
In this second of three articles (you can read the first one here), we’re exploring a few more of the most significant behavioral biases that Richard Thaler and others invested their careers to learn more about: hindsight, loss aversion, mental accounting and outcome bias.
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