You, like many people, may be worried that the market is at a high, but you are reading numbers and thoughts which have been picked to warn you “the sky is falling…the sky is falling.”
AUGUST 2021 NEWSLETTER
Some of the following information comes from an article Nick Murray wrote in his recent newsletter called “Progressing Upward Toward the Average.” You, like many people, may be worried that the market is at a high, but you are reading numbers and thoughts which have been picked to warn you “the sky is falling…the sky is falling.”
Ten years may seem like a long time, but in investment years, it is fairly short. The past decade of ten years ending in June showed a ten year return of about 14%. But, if you start from March 9, 2009, a little earlier, the return since then is over 17%. All are real numbers but still not the most important picture because they are picked to demonstrate a current phenomena while Ibbotson consistently compiles the 1926 to 2020 average of stocks as 10%. 10% is the number for the long term: 94-95 years. If you have been investing for a long time, that is the number you should use to decide how well you have done: about 10%, a little less, or, a little more. It is the kind of number which will surprise you at times with exactly how well it has done and how much money you now have.
The return since January 1, 2000, until now, 2021, is about 7%. It includes the bear market of the high-tech industry in early 2000 and the drop in 2007-2009 where we saw the unraveling of loans for real estate that should never have been made.
7% is a lot better than people have been earning with current bank deposits and it is considerably higher than many alternative investments and considerably lower than the true long-term average of the stock market over 95 years. It’s a way of noting that the stock market during the past 20 years may be under-valued, not over-valued. While there have been waves of high returns and low returns, the average over the 20 years is about 7%, while the average over 94-95 years is 10%.
Does this show there are good values in our companies and economy and we have been ‘catching up’ these past 20 years? Maybe.
It is always easy to be nervous about the big hits that occur, but the reality is the hits also bring about solutions which the knowledgeable gain from. As another friend says, “It’s a great world if you don’t weaken.”
A Few Words About IRA’s
In 2020, we had two significant government acts. It was the Cares Act, followed shortly thereafter by the Secure Act. Suffice it to say that one act gave you the right to skip your RMD (required minimum distribution) in 2020 and the other changed your beginning required age to 72 for forced first year rmd’s if you hadn’t already started at 70.5. It also took away a valuable planning tool, delayed distributions by use of a “stretch IRA” for your beneficiaries.
If you are not yet 72, you may be interested in converting some dollars each year from your IRA account to a Roth Account. If you are already withdrawing an RMD, you must take the distribution but then you can convert some additional money if you like. If any of this interests you, give us a call to discuss.
Sincerely,
Louise, Googins, President & Investment Advisor
Richard Martin, Investment Advisor
Michael Googins, Administrator
Kim Rankin, Accountant
Lynne Goldsmith, Investment Professional
Brady Peat, UW-Madison Intern
Lukas Hoertdoerfer, UW-Madison Intern
You may notice that Carson Bieber is no longer with us. We miss him but he and his new wife Sydnee decided to relocate closer to family. We are excited to welcome Lynne Goldsmith, a person with years of advising experience, joining us in a part-time capacity.