This month, a note about the importance of truly knowing who your financial planner is. These days, many financial planning companies outsource important financial planning services to a call center halfway across the country. They tell people that there are a “whole team of CFPs” that could be called on to have questions answered.
We take a different approach. Our planners sit across the table from clients, face-to-face, month in and month out. Having a personal relationship is better than sharing numbers in the cloud. We find it difficult to perform high quality, comprehensive financial planning without really knowing the client.
Leveraging new technology is a critical part of growing and scaling a business. Before implementing new technologies, we carefully evaluate the impact it will have on our client relationships. While we feel outsourcing things like email hosting and VoIP can be great for improving communication, we feel that outsourcing the financial planning piece of our business is taking it one step too far.
At a boutique firm like Chrome Asset Management, you will always get personalized service from the same planner… someone who knows you and your family, and asks helpful and thought-provoking questions. We believe the value of that is immeasurable.
January’s small dip was indeed brief as the S&P 500 eked out new all-time highs in February, closing at 1859 (previous high was 1848). After swooping down to 1742 on February 3rd, the index managed to grind higher as economic data indicated an even mix of strength and weakness throughout the month.
With no clear direction for the economy, and the extreme weather that continued in much of the north and eastern half of the U.S., investors were willing give February a pass and wait to see what the spring holds. Certainly the weather did not help the retail sector as shoppers stayed home, and the energy sector struggled as negative temperatures put a damper on exploration and production here, while natural gas and oil prices spiked as consumers turned up the heat – literally.
Also taking a wait and see approach, the Federal Reserve continued it’s modest taper in bond buying, giving the markets no reason to worry one way or another. New Fed Chairwoman Janet Yellen’s first testimony before Congress was fairly benign and signaled little change from her predecessor’s policies, at least for now. The benchmark yield on the 10 Year Treasury closed the month well below the 3% mark touched late last year, ending around 2.66%.
Corrections, crashes, and the long term investor
Considering last year’s incredible run in the stock market, and the degree to which we have come off of the lows of 2009, should long-term investors be concerned that we are overdue for a correction, or even worse a bear market? To answer this question, let’s now look at a long term, monthly chart of the S&P 500 index from 1981 to 2014:
The message of the above chart is fairly obvious: Investors who made consistent, well-diversified contributions to their accounts regardless of the gyrations of the market did very well over this period of time.
Look at the chart from 2000 to 2008 which some market watchers called a lost decade due to the lack of returns over that period, only to be followed by the financial crisis of 2008. This difficult period was followed by the stock market making all-time highs, and significantly so, by 2013. So while some of these pullbacks have been severe, you can see from the chart that most corrections are short lived and followed by the continuation of an uptrend.
Investors often wonder if it makes sense to try and time entries and exits in the markets to take advantage of these cycles. The answer is generally no. History has proven that market timing does not work. In fact, many retail investors sell at cyclical lows and buy at cyclical highs! Why is this? Because managing one’s own investments can become emotional, especially during broad swings in the markets.
That’s why it’s good to work with a competent financial advisor who can take the emotion out of investment decisions. A good advisor will help you create a plan and appropriately rebalance your portfolio during times of excessive gains or losses in one asset class or another.
Calendar of Events
As part of Team Mario Brothers, Steve Zakelj had a wonderful time at the Colorado Special Olympics Polar Plunge. Along with other clients, Steve’s team was able to raise money for the Special Olympics. Many thanks to our friends and clients who contributed and supported this great cause!
IRA Contribution Reminder
If you are contributing to an IRA, and did not make a contribution in 2013, your deadline to do so for the 2013 tax year is April 15, 2014.