As Boomers get older, we can expect that the number of retirees will grow each year. After all, the oldest member of this generation is now 74 while the youngest is 56. If we look at the statistics of Pew Research Center starting in 2012, the annual increase in the retired Baby Boomer population has run between 1.5 million to 2.5 million a year… until 2020. The increase in 2020 was markedly higher at 3.2 million, for a total number of 28.6 million retired Boomers.
Some Boomers made a lifestyle choice in 2020, accelerating their retirement plans for personal reasons. Others may have been furloughed, or lost their positions, and decided to not get back into the game. For whatever reason, this choice is best made with preparation – emotionally and financially.
Let’s begin with our financial readiness, including the consideration of the risks during retirement. The Society of Actuaries identifies 160 retirement risks, but protecting against all of these is not possible. Many are completely out of our control and not probable. Here are three significant financial risks, however, for which we can make plans:
Longevity risk. This risk of outliving our money is a sobering one, especially considering the extension of our life expectancy. Recent statistics are that for a 65-year old couple in relatively good health, there is a 50% chance that one in the couple will live to age 92, and a 25% chance that one in the couple will live to age 97. Planning for 30 years of retirement is becoming the norm, and we should prepare ourselves accordingly.
Market fluctuations. If your life savings are invested in the stock and bond markets, you can expect to confront the uncertainty of market fluctuations. Historically, 20%+ downturns in the stock market have been less frequent than people realize, but they do happen (remember March?) and create anxiety. This is when an investment plan which dovetails with our personal needs and risk tolerance is critically important.
Unexpected spending needs. It would be nice to know what negative surprise might present itself, and when it might happen, but that is not the nature of unexpected needs. What we can do, though, is model various scenarios for unexpected expenses and plan for addressing them. Stress-testing our plans also provides confidence that even an uncertain future can be handled.
Downside risks are a reality, but we can create peace of mind by addressing them. When we do, we are truly bringing together our money with the meaning it serves in our retirement lives.
Retirement planning can be an exciting process, filled with dreams of being liberated from a more structured schedule and envisioning more time to enjoy life, friends and family. Whatever our dream, planning financially and emotionally will help us enjoy it.
It’s probably not surprising that investment strategies are unique just like people. Each investment client is different in what motivates him or her to invest or how he or she feels about risk. As a result, advisors use both science and art when working with each client to develop an investment strategy and construct a portfolio of diversified investments.
Based on my experience, I begin with two overarching goals for each client:
Invest the client’s money in a globally diversified portfolio. The variety of different asset classes we consider include stock and stock like investments, bond and bond like investment, and real estate, among others. Additionally, we consider growth and value stocks in companies of all sizes. In the bond space, we look at bonds issued by governments, municipalities, corporations, and other issuers.
Take the appropriate amount of risk for the client’s circumstances and goals. It is important for an advisor and client to have a full discussion to determine an appropriate risk level using both art and science in the process.
So how much risk is appropriate for each client? First, there is a science to this decision that is driven primarily by the amount of time until the money will be needed. For some this might be retirement while for another it might be to buy a house or pay for a wedding. If there’s more time until the money is needed, the science side of investing says more risk may be appropriate. Likewise we need to reduce the risk as we get closer to needing the money.
Stock investments generally are more volatile than bond investments. So, we usually reduce the stock exposure as the date the money is needed approaches.
Second, there is also an art to determining the appropriate risk for a client to take. This is the softer side of the decision. How does the client feel about risk? Does he wake up at night worrying about the value of his account? If so, we might recommend reducing the risk level. Does she want to put the pedal to the metal and take as much risk as possible? This could lead us to considering taking more risk than the science side would dictate.
As we craft a client’s investment strategy we continue to be mindful of bringing together money and meaning. We can accomplish that when we know what each client’s ultimate goal is for his or her money. That way, we can plot a course to reach that goal and help our clients create a globally diversified investment portfolio, take the appropriate amount of risk and adjust that risk lever as the need to use the money approaches. It’s about realizing that investment is both art and science.
https://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.png00Fritz Gomilahttps://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.pngFritz Gomila2020-12-29 09:23:312021-01-26 14:00:51Thin(k) About Your 401(k) Plan: Reflections on 10 Years as An Advisor – Part 3
Office Uncertainty: it’s a real thing. With so many people working from home, I’d love to see a graph about how much time people have spent wondering if they will ever return to the office. It’s probably up there with the thought time spent how to make sourdough.
Office uncertainty has also led to some discussion about the virus’s impact on the broader real estate market. With people leaving cities, will apartments struggle? Now that companies know we can work from home, will they cut down on the overhead of office space? We learned that everything can be delivered to our door – will we ever go back to shopping in person?
The answers to these questions may not matter as much for publicly traded US Real Estate Investment Trust (REIT) investments as you may think. These investments allow liquid access to real estate exposure, so they are a nice fit for most clients. Like many things, all of the uncertainty around the virus left this investment space pretty banged up, but the above chart challenges the notion that real estate can’t thrive without offices and malls.
A large part of public real estate is now cell phone towers and data centers. I recently spoke with a fund representative who reminded me that when you order something from your phone, you actually engage three types of real estate: cell phone towers, data centers, and industrial properties. By his measure, that is about 45% of the public REIT universe.
That office space we have been pondering so frequently lately – it makes up about 7% of the public REIT space.
As I continue looking back over the last 10 years as an advisor at ThirtyNorth Investments, I realize that 2020 reflects a critical early lesson about discipline I like to share with clients and prospects. Recent conversations brought clarity to what I mean. With Covid-19 raising its ugly head again and the recent election, I have had people ask me whether or not they should stay in the market. Research shows that taking into account individual time horizons, staying invested is more likely to lead to success than trying to time the market by jumping in and out.
When Covid-19 first appeared, there were multiple clients like now who asked me if they should leave the market. One person got out and is now wondering when to get back in. The other person, after watching his account value fall in March and then recover over the ensuing months has thanked me for helping him decide to stay invested.
I have watched the market soar incredibly and also some very fast declining days. Other times, it seemed like we were going sideways for what felt like years. Anyone who tells you that they can predict consistently and with certainty what the market will do in the short-term isn’t being truthful.
What ThirtyNorth does is to look at economic conditions around the world and shift our globally diversified portfolios to lean into favorable conditions for certain asset classes when we think appropriate. Not taking large bets, rather tweaking allocations. Certain times favor growth stocks over value, and vice versa. Other times favor small cap stocks over large cap, though it hasn’t felt that way for a while. Nonetheless, we make sure our clients are invested in these asset classes at varying weights over the long-term.
At ThirtyNorth Investments, we help clients bring together money and meaning. We believe that our best chance to succeed in this mission is to understand each client’s ultimate goal for their money. That way, we can do our best to plot a course to reach that goal and help our clients avoid the temptation to bet large on the current “winner” being touted in the financial press. Or we help avoid the other big temptation to get in and out of the market in an attempt to only be invested during the good times. Both of these strategies are fraught with peril, which brings me to another of ThirtyNorth’s core principles.
Discipline is Everything – While many investing strategies and philosophies have merit, it is an investor’s ability to stick with a strategy that ultimately leads to success. Attempts to chase recent performance are generally unsuccessful and result in more trading costs and taxes. We believe that discipline and patience to follow a well-researched strategy rewards investors over the long-term.
https://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.png00Fritz Gomilahttps://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.pngFritz Gomila2020-11-20 14:31:402020-11-20 14:31:40Thin(k) About Your 401(k) Plan: Reflections on 10 Years as An Advisor – Part 2
Back in May, I posted “Thoughts in Charts: The Price of Food” which explored food inflation as a portion of the changes in prices we see in our daily lives. This chart from The Wall Street Journal article “Thanksgiving in a Pandemic Means Smaller Birds, Fewer Leftovers,” puts a Thanksgiving spin on the issue. It reports that the typical price of a Thanksgiving meal will be 3.5% higher this year than last.
Curious, I went back to the US Bureau of Labor Statistics to check on the 12-Month “food at home” category. It turns out that the increase in food prices has actually fallen slightly in the last few months. The food at home year-over year increase peaked at 5.6% in June, and is now down slightly at about 4% as of the end of October.
Economics 101 reminds us that an increase in demand on limited resources increases prices. The Wall Street Journal article reports that grocery stores are stocking Thanksgiving food early this year due to concerns about high demand. With food suppliers already struggling to keep up with demand, there is little incentive for food items to be discounted this season.
In true ThirtyNorth fashion, I’m always challenged to think about money and meaning. With food making up a large portion of most people’s monthly budgets, the charts remind me that donations to charity holiday food drives are even more valuable this year.
https://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.png00Sarah Bomhoff, CFA, CIPMhttps://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.pngSarah Bomhoff, CFA, CIPM2020-11-18 11:33:002020-11-18 11:36:22Thoughts in Charts: The Price of Pie
I just celebrated 10 years as an advisor at ThirtyNorth Investments. The cliché holds that time flies when you are having fun. I remember the day when my partner, Suzanne, and I met, and I learned about the Registered Investment Advisor structure and the fiduciary nature of our client relationships. It was like a light bulb lit up as I learned that when it comes to investment advice, my client’s interest would always come before the firm’s or mine. ThirtyNorth is legally bound to a fiduciary standard of care, which is a cornerstone on which our firm is built.
The concept of an investment advisor delivering objective advice is so foreign to most people that I sometimes struggle to explain it to prospects. At first, they might not believe it, but once I have succeeded, I see the same light bulb lighting up in their eyes. I’m not selling a product for a commission. There are no trailers. There are no fees coming from fund companies. I am helping clients invest their money in a diversified portfolio while striving to take only the appropriate amount of risk for their personal situation. Often the goal is saving for retirement and sometimes it is leaving a legacy. Whatever the case, at ThirtyNorth Investments, we help clients bring together money and meaning.
We do this because we believe that the more a client understands and trusts the investment strategy, the more comfortable they will be with market fluctuations. When clients are confident, they tend to remain invested through ups and downs. Many times, sticking by a plan leads to clients reaching their long-term goals, demonstrating one of ThirtyNorth’s core principles.
Time Matters – Investors are rewarded for taking risk in the market over extended periods of time. We can be confident there will be another market downturn, but it is impossible to know the timing of a downturn in advance. The ability to take a truly long-term view to investing is paramount to a successful investment approach, where “long-term” is not measured in days, months, or years, but in multi-year intervals.
https://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.png00Fritz Gomilahttps://thirtynorth.com/wp-content/uploads/2017/04/LOGO-ThirtyNorth-Rev2017-1.pngFritz Gomila2020-11-13 09:47:392020-11-13 13:58:57Thin(k) About Your 401(k) Plan: Reflections on 10 Years as An Advisor – Part 1
Three Key Risks of Retirement
Ready for Retirement?
As Boomers get older, we can expect that the number of retirees will grow each year. After all, the oldest member of this generation is now 74 while the youngest is 56. If we look at the statistics of Pew Research Center starting in 2012, the annual increase in the retired Baby Boomer population has run between 1.5 million to 2.5 million a year… until 2020. The increase in 2020 was markedly higher at 3.2 million, for a total number of 28.6 million retired Boomers.
Some Boomers made a lifestyle choice in 2020, accelerating their retirement plans for personal reasons. Others may have been furloughed, or lost their positions, and decided to not get back into the game. For whatever reason, this choice is best made with preparation – emotionally and financially.
Let’s begin with our financial readiness, including the consideration of the risks during retirement. The Society of Actuaries identifies 160 retirement risks, but protecting against all of these is not possible. Many are completely out of our control and not probable. Here are three significant financial risks, however, for which we can make plans:
Downside risks are a reality, but we can create peace of mind by addressing them. When we do, we are truly bringing together our money with the meaning it serves in our retirement lives.
Retirement planning can be an exciting process, filled with dreams of being liberated from a more structured schedule and envisioning more time to enjoy life, friends and family. Whatever our dream, planning financially and emotionally will help us enjoy it.
For disclosures, please click here.
Thin(k) About Your 401(k) Plan: Reflections on 10 Years as An Advisor – Part 3
It’s probably not surprising that investment strategies are unique just like people. Each investment client is different in what motivates him or her to invest or how he or she feels about risk. As a result, advisors use both science and art when working with each client to develop an investment strategy and construct a portfolio of diversified investments.
Based on my experience, I begin with two overarching goals for each client:
So how much risk is appropriate for each client? First, there is a science to this decision that is driven primarily by the amount of time until the money will be needed. For some this might be retirement while for another it might be to buy a house or pay for a wedding. If there’s more time until the money is needed, the science side of investing says more risk may be appropriate. Likewise we need to reduce the risk as we get closer to needing the money.
Stock investments generally are more volatile than bond investments. So, we usually reduce the stock exposure as the date the money is needed approaches.
Second, there is also an art to determining the appropriate risk for a client to take. This is the softer side of the decision. How does the client feel about risk? Does he wake up at night worrying about the value of his account? If so, we might recommend reducing the risk level. Does she want to put the pedal to the metal and take as much risk as possible? This could lead us to considering taking more risk than the science side would dictate.
As we craft a client’s investment strategy we continue to be mindful of bringing together money and meaning. We can accomplish that when we know what each client’s ultimate goal is for his or her money. That way, we can plot a course to reach that goal and help our clients create a globally diversified investment portfolio, take the appropriate amount of risk and adjust that risk lever as the need to use the money approaches. It’s about realizing that investment is both art and science.
Follow this link to see our core Investment Principles.
For disclosures, please click here.
Thoughts in Charts: Office Space
Office Uncertainty: it’s a real thing. With so many people working from home, I’d love to see a graph about how much time people have spent wondering if they will ever return to the office. It’s probably up there with the thought time spent how to make sourdough.
Office uncertainty has also led to some discussion about the virus’s impact on the broader real estate market. With people leaving cities, will apartments struggle? Now that companies know we can work from home, will they cut down on the overhead of office space? We learned that everything can be delivered to our door – will we ever go back to shopping in person?
The answers to these questions may not matter as much for publicly traded US Real Estate Investment Trust (REIT) investments as you may think. These investments allow liquid access to real estate exposure, so they are a nice fit for most clients. Like many things, all of the uncertainty around the virus left this investment space pretty banged up, but the above chart challenges the notion that real estate can’t thrive without offices and malls.
A large part of public real estate is now cell phone towers and data centers. I recently spoke with a fund representative who reminded me that when you order something from your phone, you actually engage three types of real estate: cell phone towers, data centers, and industrial properties. By his measure, that is about 45% of the public REIT universe.
That office space we have been pondering so frequently lately – it makes up about 7% of the public REIT space.
Alright, so about that sourdough…
For disclosures, please click here.
Thin(k) About Your 401(k) Plan: Reflections on 10 Years as An Advisor – Part 2
As I continue looking back over the last 10 years as an advisor at ThirtyNorth Investments, I realize that 2020 reflects a critical early lesson about discipline I like to share with clients and prospects. Recent conversations brought clarity to what I mean. With Covid-19 raising its ugly head again and the recent election, I have had people ask me whether or not they should stay in the market. Research shows that taking into account individual time horizons, staying invested is more likely to lead to success than trying to time the market by jumping in and out.
When Covid-19 first appeared, there were multiple clients like now who asked me if they should leave the market. One person got out and is now wondering when to get back in. The other person, after watching his account value fall in March and then recover over the ensuing months has thanked me for helping him decide to stay invested.
I have watched the market soar incredibly and also some very fast declining days. Other times, it seemed like we were going sideways for what felt like years. Anyone who tells you that they can predict consistently and with certainty what the market will do in the short-term isn’t being truthful.
What ThirtyNorth does is to look at economic conditions around the world and shift our globally diversified portfolios to lean into favorable conditions for certain asset classes when we think appropriate. Not taking large bets, rather tweaking allocations. Certain times favor growth stocks over value, and vice versa. Other times favor small cap stocks over large cap, though it hasn’t felt that way for a while. Nonetheless, we make sure our clients are invested in these asset classes at varying weights over the long-term.
At ThirtyNorth Investments, we help clients bring together money and meaning. We believe that our best chance to succeed in this mission is to understand each client’s ultimate goal for their money. That way, we can do our best to plot a course to reach that goal and help our clients avoid the temptation to bet large on the current “winner” being touted in the financial press. Or we help avoid the other big temptation to get in and out of the market in an attempt to only be invested during the good times. Both of these strategies are fraught with peril, which brings me to another of ThirtyNorth’s core principles.
Discipline is Everything – While many investing strategies and philosophies have merit, it is an investor’s ability to stick with a strategy that ultimately leads to success. Attempts to chase recent performance are generally unsuccessful and result in more trading costs and taxes. We believe that discipline and patience to follow a well-researched strategy rewards investors over the long-term.
Follow this link to see our other Investment Principles.
For disclosures, please click here.
Thoughts in Charts: The Price of Pie
Back in May, I posted “Thoughts in Charts: The Price of Food” which explored food inflation as a portion of the changes in prices we see in our daily lives. This chart from The Wall Street Journal article “Thanksgiving in a Pandemic Means Smaller Birds, Fewer Leftovers,” puts a Thanksgiving spin on the issue. It reports that the typical price of a Thanksgiving meal will be 3.5% higher this year than last.
Curious, I went back to the US Bureau of Labor Statistics to check on the 12-Month “food at home” category. It turns out that the increase in food prices has actually fallen slightly in the last few months. The food at home year-over year increase peaked at 5.6% in June, and is now down slightly at about 4% as of the end of October.
Economics 101 reminds us that an increase in demand on limited resources increases prices. The Wall Street Journal article reports that grocery stores are stocking Thanksgiving food early this year due to concerns about high demand. With food suppliers already struggling to keep up with demand, there is little incentive for food items to be discounted this season.
In true ThirtyNorth fashion, I’m always challenged to think about money and meaning. With food making up a large portion of most people’s monthly budgets, the charts remind me that donations to charity holiday food drives are even more valuable this year.
Just a little “food for thought” – if you will.
For disclosures, please click here.
Thin(k) About Your 401(k) Plan: Reflections on 10 Years as An Advisor – Part 1
I just celebrated 10 years as an advisor at ThirtyNorth Investments. The cliché holds that time flies when you are having fun. I remember the day when my partner, Suzanne, and I met, and I learned about the Registered Investment Advisor structure and the fiduciary nature of our client relationships. It was like a light bulb lit up as I learned that when it comes to investment advice, my client’s interest would always come before the firm’s or mine. ThirtyNorth is legally bound to a fiduciary standard of care, which is a cornerstone on which our firm is built.
The concept of an investment advisor delivering objective advice is so foreign to most people that I sometimes struggle to explain it to prospects. At first, they might not believe it, but once I have succeeded, I see the same light bulb lighting up in their eyes. I’m not selling a product for a commission. There are no trailers. There are no fees coming from fund companies. I am helping clients invest their money in a diversified portfolio while striving to take only the appropriate amount of risk for their personal situation. Often the goal is saving for retirement and sometimes it is leaving a legacy. Whatever the case, at ThirtyNorth Investments, we help clients bring together money and meaning.
We do this because we believe that the more a client understands and trusts the investment strategy, the more comfortable they will be with market fluctuations. When clients are confident, they tend to remain invested through ups and downs. Many times, sticking by a plan leads to clients reaching their long-term goals, demonstrating one of ThirtyNorth’s core principles.
Time Matters – Investors are rewarded for taking risk in the market over extended periods of time. We can be confident there will be another market downturn, but it is impossible to know the timing of a downturn in advance. The ability to take a truly long-term view to investing is paramount to a successful investment approach, where “long-term” is not measured in days, months, or years, but in multi-year intervals.
Follow this link to see our other Investment Principles.
For disclosures, please click here.