Here's the Roundup for a midwinter's weekend. Enjoy!
SMI executive editor Mark Biller talked about the key "building blocks" of a successful long-term plan on Monday's MoneyWise Live from Moody Radio.
To listen, click the play button below — or, if you prefer, scroll down for a transcript. (And for more radio appearances by members of the SMI team, visit our Resources page.)
With the markets closed today for Washington's Birthday, I'm reminded of some financial advice from our first president.
It's in a letter Washington wrote to a Mr. James Welch — a man who owed Washington money.
In 1797, about the time he retired from the presidency, Washington leased part of his land along Virginia's (now West Virginia's) Great Kanawha River to Mr. Welch. Two years later, James Welch had yet to make a payment.
In fact, not only was he failing to pay Washington, but Welch also was trying to borrow money from others using Washington as a reference!
Here is an excerpt from the letter George Washington sent to James Welch in the Spring of 1799:
April 7, 1799
I have received your letter of the 10th of March....
It would be uncandid, Mr Welch, not to inform you that I have heard too much of your character lately, not to expect tale after tale...of your numerous disappointments, by way of excuses for the non-compliance of your agreement with me....
I am not unacquainted, Sir, with your repeated declarations of your having purchased my lands on the Great Kanawa and endeavoring by that means, and...misrepresentations to obtain extensive credit where you were not known. Letters, to enquire into the truth of these things, have been written to me on the subject....
I will...assure you in the most unequivocal terms of two things — first, that I am in extreme want of the money which you gave me a solemn promise I should receive the first of January last; and secondly — that however you may have succeeded in imposing upon, and deceiving others, you shall not practice the like game with me with impunity. To contract new debts is not the way to pay old ones....
Consider this letter well; and then write without any deception....
Your Very Humble Servant,
As it turned out, George Washington was a better general and president than he was a collection agent — Welch never paid the money.
The part of Washinton's letter we would all to do well to remember is this: "To contract new debts is not the way to pay old ones." He was telling Welch to stop borrowing until he paid what he already owed. Wise advice — even more so in the age of the credit card.
(My boss of many years, Larry Burkett, used to put it this way, "If you're in a financial hole, stop digging.")
Here's one other interesting fact on Washington's Birthday: George Washington's image first appeared on the U.S. one-dollar bill in 1869. The head-and-shoulders image used by the U.S. Bureau of Engraving and Printing (and still in use today) is based on Gilbert Stuart's 1796 portrait of Washington. Stuart's original painting hangs in the National Portrait Gallery in Washington, D.C.
SMI's Personal Portfolio Tracker and monthly Fund Performance Rankings have been updated with performance data through Jan. 31, 2020.
• The Portfolio Tracker: The Tracker can personalize SMI's fund rankings to your specific situation, making it easier to apply our momentum-based Fund Upgrading strategy to your 401(k), 403(b), or other retirement plan.
Using the Tracker, you can filter the performance data of 25,000+ funds we follow and produce a concise report covering only the funds available in your plan(s). If you're new to the online Tracker, watch the introductory video.
We typically update the Personal Portfolio Tracker with the latest month-end data from the research firm Morningstar on the 8th of the new month, except when the 8th falls on a weekend (as it did this month). We wait until at least the 8th because Morningstar's database is subject to revisions during the first few days of the month. By the 8th, the previous month's performance numbers are reliable.
• Fund Performance Rankings (FPR): The FPR report is a 38-page downloadable PDF file containing the latest performance data — along with SMI's momentum rankings — for more than 1,600 no-load traditional funds and ETFs.
The funds included in the FPR are selected on the basis of asset size, brand familiarity, and brokerage availability.
Check page 2 to learn how to use the FPR report. Page 3 includes an overview of the 70+ risk categories that will help you compare "apples to apples." Page 4 has explanations of the various data-column headings.
Here's our latest collection of interesting articles on investing, personal finance, and stewardship.
Grab a cup of hot cocoa and enjoy!
- The Secure Act killed the stretch IRA — here are alternatives for your inheritance (MarketWatch). The new law didn't "kill" the stretch IRA, but it did tighten the rules re: who is eligible. If you're looking for alternative approaches, here are a few ideas.
- Corporate America has a 1%, too, more influential than ever (Associated Press). By market value, the five biggest U.S. stocks — Microsoft, Apple, Alphabet (Google), Amazon, and Facebook — now account for nearly 18% of the S&P 500 index.
- Social Security: Where do the 2020 candidates stand? (New York Times). As recently as 2010, some Democrats were willing to embrace the idea of reining-in SS benefits as a means of shoring up the program's finances. Now, the call is for expansion of benefits — and higher taxes to fund them.
- What is a sinking fund? (MintLife). "Sinking" is a good thing in this case.
- Survey says consumers love their tax refunds (news release via Yahoo Finance). Go figure. Nearly two-thirds (63%) of those surveyed said they'd rather get an income-tax refund than get bigger paychecks throughout the year.
And from the bloggers and pundits...
- Now never feels like the right time to invest (Ashby Daniels, Retirement Field Guide). Especially when you're investing a lump sum.
- A spousal IRA may be the best gift you can give your non-working husband or wife (Sarah Holden, MarketWatch). If you're the sole breadwinner, you can use your earnings to contribute to either a traditional or Roth IRA for your spouse.
- Great to gone (Jonathan Clements, Humble Dollar). Why do great family fortunes rarely last more than a few generations?
- Holding on to a job after age 50 isn't always easy (Mark Hulbert, MarketWatch). More here on a study mentioned in our January newsletter article, Unplanned Early Retirement – It’s More Common Than You Might Think.
- Paying taxes with the right attitude (Michael Blue, MoneyWise). This is from last year's tax season, but the principles remain the same.
Your comments are welcome and appreciated. "Join the Discussion" below!
"Risk is what you don't see." So wrote the fine financial writer Morgan Housel on January 14.
On January 17, coming off one the best years in a long time, the S&P 500 hit yet another high. No one was saying the future was unclouded — there are always concerns — but many investors were feeling pretty good.
Who knew that within two weeks, the market would have a case of the jitters and be down by more than 3%? And last week, despite stellar earnings reports from Amazon, Apple, and others, the market would suffer its largest one-week decline in five months,
The main culprit — unforeseen just weeks ago — is the coronavirus emanating from China. The World Health Organization has declared a health emergency and the U.S. State Department is issuing international travel advisories. And investors are nervous.
Caught off guard
Of all the economic and market risks discussed by pundits as the new year began, I can't recall anyone warning of a possible pandemic.
Risk is what you don't see.
Of course, it may be that this outbreak will turn out to have a minimal impact on the world economy and investment markets. I've been around long enough to know that early reports (and early predictions) often turn out to be overly pessimistic. And markets tend to overreact.
Although what the outcome will be is anyone's guess, we do know that both the SARS epidemic in 2003 and the Zika outbreak in 2016 had limited effects on investment markets."In both cases, stocks were sharply higher a year later," notes the financial newspaper Barron's. Past performance, however, is no guarantee of future results.
The coronavirus in only the latest in a long list of things that caught most investors — yes, even the "experts" — off-guard. Others in recent memory include the Trump electoral victory and voter approval of the Brexit referendum, both in 2016. You just never know what might happen.
The things you can control
So how do you prepare for the unexpected? Our February cover article, The Core Building Blocks of Successful Investing, is a good place to start. It lays out the crucial things you can control about your financial life and your investing strategy. If you attend to those things, you'll be able to "roll with the punches" regarding all the things you can't control.
As we say in the article, "Focusing on the things you can control is an effective counter-weight to concerns about the market (or the economy, or the Middle East, or the next election, etc.)." Or the coronavirus.
Also, review Matt's piece from a few weeks ago (posted just after the U.S. drone strike that killed Iranian General Qassem Soleimani) titled It's Always Something. There will always be something somewhere that rattles the markets. If not today, then tomorrow, or perhaps next week.
But if you focus on what you can do, not on external events, you're more likely to come out ahead, and enjoy greater peace of mind along the way.
The retirement-planning landscape in the USA is different now than it was just a few weeks ago. A federal law took effect January 1 that affects required minimum distributions (RMDs), IRA contributions, inherited retirement accounts, retirement-account investment options, and more.
The SECURE Act has 29 provisions in all, although not all are retirement-related. (SECURE stands for Setting Every Community Up for Retirement Enhancement.) Here are the most notable provisions:
Here's our latest collection of worthwhile reads on investing, personal finance, and stewardship. We hope you find them interesting and helpful!
When assessing investment risk, it's wise to consider if you are emotionally prepared for what could be a wide range of possible outcomes.
SMI executive editor Mark Biller talked about that on yesterday's MoneyWise Live on Moody Radio.
A friend told me last week that she and her husband had just completed their annual "State of the Union" meeting.
Around the first of each year — while enjoying a leisurely dinner at a quiet restaurant — they review the year gone by and discuss the year ahead.
"I saw a blog post about this 'State of the Union' idea a few years ago, and we decided to start doing it," she told me.
They begin each annual session with a look back. "We talk about our goals from last year — what worked and what needs improvement. Then we pray for the new year. And we talk specifically about our marriage and about how we can pray for each other."
Next, they turn to finances — first reviewing their spending and saving over the past 12 months and then discussing adjustments for the new year. They take careful notes to ensure that talk leads to actions. "If you don't write down your goals, you're going to forget them," she said.
One item they discussed this year, I was told, was how to use the husband's recent pay raise. They agreed the increase should go toward their savings. (Within a few days of their meeting, they implemented that decision by setting up a repeating transfer of a specific dollar amount to a savings account.)
Next, their annual State of the Union talk turns to home improvement projects for the new year (most of them small, but occasionally a larger project, such as renovating a bathroom).
Finally, they discuss one-year and five-year goals for them as a couple and for their family, such as taking a vacation to a particular destination. (Those one-year and five-year goals are written out and hung on the refrigerator as regular reminders.)
Talking it through
I find the idea of having a "State of the Union" meeting once a year intriguing. My wife and I will have to try it (she'll certainly like the "leisurely dinner out" part)!
What about you? Do you and your spouse have an annual "look back/look ahead" session? Or do you use some other approach to planning? Tell us about it in the comments section.