Allocations, Returns, and Market Cycles

Market volitility may be increasing soon. Many observers believe we are preparing for a market peak in 2015 to 2016 (i.e. Peter Eliades, June 16, 2016, go to minute 25). Others who are more bullish imagine the beginning of a new 20 year bull market, which started in March 2009 (Brian Belski, BMO). The reality is there is no perfect investment and a low probability that anyone can consistently, accurately time when to be in and out of the market (John Hussman, weekly comments). Investing experience requires many skills, but also a bit of luck for many investors. Being able to dollar cost average into a market for multiple decades without an unlucky patch of a job loss, divorce, health issue or other item that derails your plan is a sign of discipline and luck. Paul Merriman has created this table to show you how various allocations have impacted investors' returns since 1970. Many can argue the sample size is too small, but it also includes many different market environments. If your allocation shows too much downside risk, maybe it is time to work with your financial advisor to reallocate. Paul leaves us with this quote:

This is always true: We cannot know in advance the best time to invest our money nor the best time to withdraw our money. The best guidance I can give is to invest money when it's available and withdraw it when you need it.

Please consult a financial advisor before making any changes to your portfolio. This blog is for information purposes only and does not constitute individual investment advice.

Another Look at Net Worth in America

Meanwhile, the rest of the country’s net worth has actually fallen since the Great Recession — and has yet to recover. The net worth of American families — that is, the difference between the values of their assets, including homes and investments, and liabilities — fell to $81,400 in 2013, down slightly from $82,300 in 2010, but a long way off the $135,700 in 2007, according to a report released last January by the nonprofit think tank Pew Research Center in Washington, D.C. That means that, even though the Great Recession is officially over, Americans are still around 40% poorer than they were in 2007, the year before the global financial crisis. The median net worth of white households was $141,900 in 2013, down 26% since 2007. It declined by 42% to $13,700 over the same period for Hispanic households and fell by 43% to $11,000 for African-American households.

Active Management

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Median P/E's Show Valuation Issues

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Net Worth in America

This is more proof we have a retirement crisis in America. USA Today shows us the net worth of American households as of 2011. While average net worth has probably grown since 2011, it is interesting to learn how our net worth compares to households in the United States. These numbers don't paint a pretty picture for our future. From the article, here are the 50th percentile net worth figures by age group:

Under 35 Net worth $6,682

35 to 44 Net worth $35,000

45 to 54 Net worth $84,542

55 to 64 Net worth $144,200

Over 65 Net worth $171,135

Sources: Census Bureau, The Motley Fool, George Petras, USA TODAY Article

Student Loan Data for United States

Read this if you want to get a better understanding of the student loan situation in America. The full report has many interesting graphs and charts.

Median Income Peaked in 1999 or Earlier for Most Counties in USA

The Washington Post has an interested infographic showing when each county in the US saw per capita median income peak.

Median household income peaked at least 15 years ago in 81 percent of U.S. counties. That means that when incomes are adjusted for inflation, most middle class households are actually earning less money than they did years ago. Even though the economy is finally revving up, most Americans still don’t see the benefits in their paychecks.

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The reasons are many but common sense economic theory tells us that ultimately this is the result of a supply and demand problem for the median worker, low interest rates, and a lack of savings/capital accumulated by the median household.