This is Brad Barrie, Chief Investment Officer and Portfolio Manager with Dynamic Wealth Group. Welcome to this market and economic update. In this video, we’ll discuss the history and evolution of retirement from pensions to 401(k)s, and how investors can navigate planning and investing for their futures.
We’ll touch on the importance of saving early, harnessing the benefits of long-term economic growth for your personal portfolio, and the value of diversification and thinking through your unique financial and retirement goals.
This is especially important today due to recent market swings. Many investors are concerned about the presidential election, the Fed, and what will happen next with large cap tech stocks. As always, it’s important for all investors to stay focused on long run financial goals rather than reacting to day-to-day headlines.
First, this chart shows the number of participants in defined benefit and defined contribution retirement plans over time. Defined benefit plans, are commonly referred to as pensions, are where an employee is guaranteed a regular income in a set amount when they retire, have declined over the decades.
401(k)s and 403(b)s, two types of defined contribution plans, have grown in popularity since their introduction. These plans allow employees to make pre-tax contributions to which they have greater control over managing.
However, this can be a double-edged sword since defined contribution plans require employees to take a more active role in planning for retirement. Thus, it’s more important than ever for investors to understand the basic principles of investing.
Next, this chart shows the historical risk and returns of various portfolio allocations of stocks and bonds.
Annualized portfolio returns are shown in blue and volatility, measured by the standard deviation, is shown in gold.
Now regular followers of mine will know we do not generally like using standard deviation as a measure of risk. Most simplistically standard deviation is made up of both gain and loss deviation. My guess is you’d want to deviate on the gain side but not the loss side. So, at Dynamic Wealth Group, we use advanced tools to break down the components and measure an investment and overall portfolios loss deviation. After all, if you measure the wrong thing, you might not get what you actually think you will. There’s an old saying that goes, measure twice, and cut once. Well, if you’re measuring the wrong thing, it doesn’t matter how many times you do it! (See Also: The ABC’s of Financial Terms)
However, I digress, as you can see, portfolios consisting entirely of stocks have the highest returns, but also come with the highest level of standard deviation. A portfolio of only bonds is less volatile but has a lower rate of return.
Which portfolio mix is most appropriate depends entirely on the investor and their needs. The right mix of investments in a portfolio should include more than just stocks & bonds, it should follow what we call a Multi-Dimensional Approach towards diversification and asset allocation.
Finally, this chart shows the value of staying invested over long periods of time. It emphasizes the importance of not overreacting to dips in the market, but to instead remain focused on the long run to benefit from growth. This is especially relevant today given the level of market uncertainty that investors may face over the next several months.
Planning for retirement can feel daunting, but by starting early and investing in an appropriate portfolio, investors can help to secure their financial futures.
I hope you found these insights valuable. If you are a financial advisor and would like more information on our Multi-Dimensional Approach towards asset management or if you’d like to learn more about standard deviation versus loss deviation, you can download our eye-opening whitepaper titled, “Busting seven risk and return myths”, please click the link below or visit our website DynamicWG.com, or reach out directly by emailing us at: Info@DynamicWG.com. If you are an individual investor, we are happy to address any questions you may have and put you in touch with a qualified advisor if so desired. Until next time, take care everyone, and make smart, logical & fact-based financial decisions.
Disclaimer:
Clearnomics and Dynamic Wealth Group, LLC are not affiliated entities. No part of this should be taken as investment advice. Consult your financial advisor for specific investment recommendations tailored to your specific situation.
Dynamic Wealth Group (“Dynamic”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of Dynamic by the SEC, nor does it indicate that Dynamic has attained a particular level of skill or ability. This material prepared by Dynamic is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Dynamic are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Dynamic, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.
Dynamic does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.
Any reference to an index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. Past performance is no guarantee of future results. Actual returns may be lower.
< Commentary
Investing for Retirement Amid Market Uncertainty
This is Brad Barrie, Chief Investment Officer and Portfolio Manager with Dynamic Wealth Group. Welcome to this market and economic update. In this video, we’ll discuss the history and evolution of retirement from pensions to 401(k)s, and how investors can navigate planning and investing for their futures.
We’ll touch on the importance of saving early, harnessing the benefits of long-term economic growth for your personal portfolio, and the value of diversification and thinking through your unique financial and retirement goals.
This is especially important today due to recent market swings. Many investors are concerned about the presidential election, the Fed, and what will happen next with large cap tech stocks. As always, it’s important for all investors to stay focused on long run financial goals rather than reacting to day-to-day headlines.
First, this chart shows the number of participants in defined benefit and defined contribution retirement plans over time. Defined benefit plans, are commonly referred to as pensions, are where an employee is guaranteed a regular income in a set amount when they retire, have declined over the decades.
401(k)s and 403(b)s, two types of defined contribution plans, have grown in popularity since their introduction. These plans allow employees to make pre-tax contributions to which they have greater control over managing.
However, this can be a double-edged sword since defined contribution plans require employees to take a more active role in planning for retirement. Thus, it’s more important than ever for investors to understand the basic principles of investing.
Next, this chart shows the historical risk and returns of various portfolio allocations of stocks and bonds.
Annualized portfolio returns are shown in blue and volatility, measured by the standard deviation, is shown in gold.
Now regular followers of mine will know we do not generally like using standard deviation as a measure of risk. Most simplistically standard deviation is made up of both gain and loss deviation. My guess is you’d want to deviate on the gain side but not the loss side. So, at Dynamic Wealth Group, we use advanced tools to break down the components and measure an investment and overall portfolios loss deviation. After all, if you measure the wrong thing, you might not get what you actually think you will. There’s an old saying that goes, measure twice, and cut once. Well, if you’re measuring the wrong thing, it doesn’t matter how many times you do it! (See Also: The ABC’s of Financial Terms)
However, I digress, as you can see, portfolios consisting entirely of stocks have the highest returns, but also come with the highest level of standard deviation. A portfolio of only bonds is less volatile but has a lower rate of return.
Which portfolio mix is most appropriate depends entirely on the investor and their needs. The right mix of investments in a portfolio should include more than just stocks & bonds, it should follow what we call a Multi-Dimensional Approach towards diversification and asset allocation.
Finally, this chart shows the value of staying invested over long periods of time. It emphasizes the importance of not overreacting to dips in the market, but to instead remain focused on the long run to benefit from growth. This is especially relevant today given the level of market uncertainty that investors may face over the next several months.
Planning for retirement can feel daunting, but by starting early and investing in an appropriate portfolio, investors can help to secure their financial futures.
I hope you found these insights valuable. If you are a financial advisor and would like more information on our Multi-Dimensional Approach towards asset management or if you’d like to learn more about standard deviation versus loss deviation, you can download our eye-opening whitepaper titled, “Busting seven risk and return myths”, please click the link below or visit our website DynamicWG.com, or reach out directly by emailing us at: Info@DynamicWG.com. If you are an individual investor, we are happy to address any questions you may have and put you in touch with a qualified advisor if so desired. Until next time, take care everyone, and make smart, logical & fact-based financial decisions.
Disclaimer: