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JUST PLAIN TALK: So you want to retire this year?

Buz Livingston
Walton Sun

With 2019’s returns, your year-end statements should bring a smile, but a dose of caution is never unwarranted. In “Pudd’nhead Wilson,” Mark Twain wrote, “October, this is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, and August.” Some take Twain’s comments as sarcasm, but one investment cost Twain the modern-day equivalent of $4 million; he spoke from experience.

While the country is nowhere near a recession, last year’s results will be hard to repeat. No one should panic but don’t take just my word. Omar Aguilar, Schwab’s chief investment officer for investments agrees.

U.S stocks, on average, rose over 28 percent, and international shares were not far behind, 23%.

Despite these exemplary numbers, retail investors pulled over $160 billion from domestic stock mutual fund/ETFs and over $32 billion from international funds and ETFs in 2019. Bond funds, on the other hand, saw an inflow of almost $450 billion for the year. You never go broke taking a profit; someone has been listening.

Whether you plan to retire soon or later, ask yourself what would your portfolio look like if the 2007-2008 meltdown occurred. The next recession is coming; we don’t know when or how severe it will be.

The National Bureau of Economic Research found a sizable number (82%) of retirees felt comfortable about their finances. Here’s page two; the same percentage felt similarly in 2005, and we know the rest of the story. The number of retirees who expressed a lack of confidence about finances and retirement is at a multi-decade low.

I can call Bill Bernstein my mentor; I bought all of his books. Since it’s great, I reread “The Investor’s Manifesto: Preparing for Prosperity, Armageddon and Everything In Between” last year. Bernstein stresses emotional discipline is critical for investors but especially for retirees. Too often, as borne by statistics, people react emotionally during market declines and sell. You won’t find many pictures on the walls of The Market Timing Hall of Fame. Make sure your investments are suitable for goals, time horizon, and risk tolerance.

In a way, last year’s returns were a simple twist of fate or perhaps the calendar. If the beginning date was Oct. 1st instead of Jan. 1st , the S&P’s return is closer to 10% rather than 30%. Mean-revision or return to the mean sounds esoteric, but it is an essential concept for investors. Investment performance, over time, tracks the average return. A portfolio will, over time, as always, be the overall return of the market plus or minus the amount of risk you take.

If you are in town for the 30A Songwriters Festival, don’t start drinking early. Support the musicians you like; buying music is one of the best investments you can make.

You can’t always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.