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401(k) IN FOCUS
®
401(k) SOLUTIONS
March 2019
Quarterly Market Update p. 5
Timing the Market vs. Time in the Market. What is the Difference? p. 7
Know Your Financial Vitals. Get Your “Retirement Check-up” Now. p. 8
Goal Setting for Financial Success
2 MARCH 2019
®
401(k) SOLUTIONS
The New Year is a great time for goal-setting. Dropping
a few pounds and calling your mom more often are
worthwhile goals. At the same time, why not use the
beginning of the year to set a course toward a more secure
future with some well-chosen financial goals?
With so many priorities competing for your money,
deciding which are the most important can be challenging.
And the challenge doesn’t end there. How can you make
the most of your efforts when setting financial goals? We
suggest you set financial goals that are SMART: Specific,
Measurable, Achievable, Realistic and Timely.
Step 1: Start with some simple list-making
Like so many tasks in life, it can be helpful to start with
a list. For most people, a list of financial goals includes
saving for retirement, emergencies, buying a house, and
funding college. Of course, there are many other things
you’ll need or want that require money. At this point, jot
down everything that comes to mind and that has a cost
associated with it. You can even include your family in this
process. You’ll find it might have a greater impact. Don’t
worry about details or priorities yet; we’ll get to that in a
minute.
Goal Setting for Financial Success: 3 Steps to Achieving Your Financial Goals
3MARCH 2019
Once your financial goals are committed to the page or
the screen, you’ll need to take a look at where you’re
starting financially. Prepare a spreadsheet of your current
finances. Include debt such as credit cards, mortgage,
student loans and the like. Then note your current savings,
whether in the bank or in an investment account. Put down
any retirement savings, future financial obligations you
may face, and other pertinent information.
For the next month, track your spending. You may be
surprised to learn where your money is actually going. If
you find you’re overspending on items that really aren’t
that important to you, you can shift gears and direct
the money toward your SMART goals. To help with this
budgeting task, use a simple online budgeting tool, like
Mint, LevelMoney, or GoodBudget.
Step 2: Evaluate needs, wants, and priorities
Now it’s time to refine your goals, assigning them priorities
and adding details. As you begin, remember the difference
between a “need” and a “want.” The “needs,” of course,
go at the top of the list. Later, when you are making
progress on them, you’ll be in a better position to move
onto your “wants.”
How do you prioritize goals that all seem to be important?
At Fisher 401(k), we believe that, for most people, three
of the most important financial priorities are: saving for
retirement, paying off debt, and building an emergency
fund. Paying off debt—the sooner, the better—saves you
money in the long run by eliminating expensive interest
charges. An emergency fund can help you avoid adding
debt when the dryer gives up or the car needs a new
transmission. And of course, the average Social Security
retirement benefit of $1,404 monthly just isn’t enough in
most cases.
Step 3: Make your goals SMART
Now that you’ve prioritized your financial goals, it’s time
to add details using the SMART system, mentioned earlier.
This is where goals are separated from dreams.
Each goal should be:
• Specific. Rather than “Pay down debt” make it
“Pay off Joe’s Department Store account.”
• Measurable. Instead of “Save more in my bank
account” say “Put $25 more each week in my
savings account.”
• Achievable. Incremental goals help you build
steam and enthusiasm, so say “I will eat
in a restaurant just 2 times this month instead of
once a week” rather than “I will never eat out
again.”
• Realistic. You are more likely to give up if your
goal is “Save $1,000,000 by the time I’m
30” than if you set a realistic goal, like “Use my
401(k) plan’s estimation tool to find out how much
I would have to save to reach $1,000,000 when
I’m 65.”
• Timely. Each goal needs a specific timeline, like
“Pay off my student loan by December 31, 2019.”
Feeling overwhelmed? Then work on only the highest
priority items, maybe 4 or 5 of them, and leave the rest for
a later time. Once you progress on your high priorities—or
even better, when they are accomplished and drop off the
list entirely—you’ll feel better able to handle the others.
Finally, remember that without action a goal is just words
on a computer screen or a spreadsheet. Be determined to
take action, and the results will start to build.
Review, revise and get results
It isn’t enough to write out your goals and never look at
them again. As you work on this project, set a date to
review your goals and the progress you’re making. If you
slip up, don’t give up. Rather, get back on track right away.
When you are persistent, you stand the best chance of
meeting your financial goals.
4 MARCH 2019
®
401(k) SOLUTIONS
5MARCH 2019
Quarterly Market Update from the Fisher Investments’ Investment Policy Committee2018 was a difficult year—a rollercoaster of highs and lows
capped off by the second-worst December on record.
World stocks declined -8.7% last year.1 Yet, looking forward
(as markets do), evidence we will show you overwhelmingly
argues against bearishness now. World stocks’ 11.2% jump
off Christmas Eve’s low now looks like a classic V-shaped
rebound typical of market recoveries.2 We expect it was the
beginning of a brighter 2019—with December proving the
adage it is always darkest before dawn.
Consider the backdrop using US stocks, given their much
longer published record than global markets. Following all
corrections (sharp, sentiment-driven drops exceeding -10%),
returns in the 12 months after the bottom average 34%
before dividends.3 Such moves aren’t uniformly positive—
they bring volatility with them, and a renewed or additional
correction is always possible.
That said, late-2018’s pullback appears to be a correction
that ended on Christmas Eve. Assuming so, it will have ended
closer to calendar yearend than any preceding correction
or bear market. That means timing-wise calendar-year 2019
will align very closely to the 12 months off a correction
low. Therefore, simply achieving average post-correction
12-month returns—plus a little to include dividends—implies
an outstanding year ahead. Outside global recessions and
world wars, stocks have never fallen two years in a row.4 The
vast majority of economic indicators suggest a recession
isn’t looming. Pockets of weakness exist—always do. But
most of the world is growing fine.
Many tried pinning December’s mayhem on recycled fears
like Brexit, trade tensions, Fed policy, White House chaos,
China and signs of slowing growth. To an extent, all likely
influenced sentiment, contributing to the volatility. But these
don’t explain US stocks’ -15.6% decline between December
3 and December 24.5 Our hypothesis is that hundreds of
hedge funds, maybe over 500, were silently preparing to
close by yearend, requiring them to liquidate in December.
We think scads more raised mountains of cash to meet a
flood of early-January redemption requests they anticipated
after years of poor performance. Because most hedge
funds are unregistered and announce closures only to their
investors, there are no good data on how many shuttered.
But based on our interactions with other institutional
investors and market makers, our observations of market
movement and Ken’s decades of industry experience,
we believe they collided against each other as the month
proceeded, cascading prices lower as they prioritized speed
over price with little incentive to optimize trade results. It
was like someone yelling “FIRE!” in a crowded theater,
with everyone stampeding through a narrow doorway at
once. Seeing the stampede, retail investors also panicked.
Liquidity plunged as markets gyrated wildly. A typical day
6 MARCH 2019
®
401(k) SOLUTIONS
saw stocks rise or dip early on, only to get bombed by mass
selling midday and finish down -1% or more.
All evidence suggests this forced selling ended after
Christmas. Market action on December 26 and 27 was
consistent with short-sellers being squeezed and scrambling
to cover open positions. The lack of wild intraday volatility
since suggests the hedge funds finished blowing out their
liquidations. The past four weeks appear to be the V-shaped
correction’s right side. We anticipate more gains ahead,
although the path could be jagged, moving more slowly
now.
Politics should also provide a tailwind in 2019, with this
being year three in President Trump’s first term—hugely
the four-year presidential cycle’s best. Third years average
17.8% since 1925 and haven’t been negative since World
War II’s 1939 onset—and even then down only -0.9%.6
That positivity stems from gridlock, which is alive and well
after midterms returned the traditional partisan form to
the Beltway, replacing the intraparty variety existing since
2016. Gridlock also reigns globally, with most European
governments either minority administrations or weak
coalitions that can’t do much. The major political question
mark—Brexit—should sunset soon, delivering investors
much-needed clarity whatever the outcome.
Economic fundamentals are also better than most suspect.
Leading Economic Indexes (LEIs) for the US and eurozone
remain in long uptrends—high and rising. Recessions usually
don’t begin until LEIs have fallen for several months. China’s
government has launched a large stimulus program—
underappreciated by many—which so far seems to be
keeping the long-dreaded hard landing at bay. Britain’s
continued GDP growth keeps defying Brexit dread. Very few
nations of significance have experienced contracting GDP
recently (there are almost always some). Even those appear
to be minor—stemming from unique, one-off, temporary
situations.
Little noticed amid the gloom, valuations contracted last
year as stocks fell while earnings soared. There is only one
aspect related to valuations that helps with timing markets:
When valuations contract one year, they usually expand
the next—even if there is a recession. With global and US
corporate earnings projected to grow this year—and since
earnings almost always top analysts’ consensus estimates—
expanding valuations on top of strong earnings implies
stock price increases.
Volatility is a two-way street. We got the bad kind in Q4. We
are riding the good kind so far in 2019. The unpleasant can
always return, as another correction is possible, for any or
no reason. But overall, we expect 2019 to be the payoff for
discipline and patience in 2018.
- The Investment Policy Committee
¹ Source: FactSet, as of 1/16/2019. MSCI World Index
return with net dividends, 12/31/2017 – 12/31/2018.
² Source: FactSet, as of 1/25/2019. MSCI World Index
return with net dividends, 12/24/2018 – 1/25/2019.
³ Source: FactSet, as of 12/7/2018. S&P 500 price
returns 12 months after correction troughs, 5/14/1928
– 2/11/2017.4 Source: Global Financial Data, Inc., as of 1/25/2019. S&P
500 annual total return, 1925 – 2018.5 Source: FactSet, as of 1/16/2019. S&P 500 total return,
12/3/2018 – 12/24/2018.6 Source: Global Financial Data, Inc., as of 1/14/2019. S&P
500 annual total returns, 1925 – 2018.
FAQ–Ask a Retirement Counselor Timing the Market vs. Time in the MarketIf recent market volatility has you scared and worried about
your retirement savings, you are not alone. Human instincts
of fight or flight can seep into our investing habits resulting
in emotional decision making. We believe, when people
get emotional, they focus too much on near term volatility
and forget about their long term goals. Research by
Benartzi and Thaler (1995,1997) shows people fear losses
almost twice as much as they enjoy gains. Hence, we are
hard wired to worry.
So how do we maintain a long term perspective and avoid
irrational decision making based on short term volatility?
Unfortunately, this is easier said than done. As Benjamin
Graham famously wrote, “The investor’s chief problem—
and even his worst enemy—is likely to be himself.”
When we are dealing with our life savings, it’s easy to
get emotional. But that’s exactly what we have to train
ourselves not to do.
Start by tuning out the news. The media’s job is to get
your attention with inflammatory headlines, not keep you
objective and calm so you can make rationale investment
decisions. There is nothing wrong with being educated
and informed, but focus more on long term trends than
day to day fluctuations. If you are worried about a trend,
don’t forget you are not alone. Your Retirement Counselor
is here to discuss market conditions and provide context.
According to a third party study by DALBAR, the average
equity investor over the past 25 years earned only 7.9%,
compared to U.S. stocks that earned 9.7%. You can see
that the power of compounding interest provided by time
in the market proved more valuable than trying to time the
market.
So how do we stay comfortable with our investment
strategy when market volatility persists? Let’s first start
with the goal—Retirement. Our investment strategy
should align with that goal at all times. Shifting strategies
greatly affects expected growth rates, which makes
planning towards a retirement goal nearly impossible. It’s
also unnecessary because the difference between perfect
timing and poor timing is nominal. Consider the following
hypothetical:
Two siblings each have $10,000 a year to invest in the
global stock market. They invest for a period of 41 years
starting in 1977.
Jane has perfect timing and invests at the monthly market
low of each year—capitalizing on each year’s full market
upside.
John has poor timing and invests at the monthly market
high of each year—experiencing the full extent of each
year’s market downside.
At the end of our hypothetical example Jane, with her
impossibly perfect timing realizes a 9.3% annualized return.
More surprising though is John with poor timing receiving
8.8%. The difference between perfect timing and poor
timing is only 0.5%! With such a small difference, you can
be confident that even with poor timing your strategy will
likely still align with your overall goal. We understand that planning for retirement can be
stressful, but we’re here to help! Please give your
Retirement Counselor a call at 888-322-7586 if you would
like to discuss your strategy and how it aligns with your
goals.
7MARCH 2019
AboutGreg Grooms
Greg Grooms joined Fisher
401(k) Solutions as a
Retirement Counselor in
2018. Prior to Fisher, Greg
was a 401(k) Advisor for
Sanctuary Wealth Management. Greg earned his MBA
in Business Administration and Management from Idaho
State University College of Business.
8
CONTACT US
If you have a 401(k) account serviced by Fisher Investments 401(k) Solutions and need help or have
any questions, please contact us at 888-322-7586. We can help you with your 401(k) account, including
assistance with technical issues, as well as other service needs. We can also help answer questions about
the latest news developments and what they may mean in terms of investments and retirement planning.
K02163V March 2019©2019 Fisher Investments.
Investing in stock markets involves the risk of loss. Past performance is never a guarantee of future returns. This newsletter is intended for educational purposes only. It constitutes the general views of Fisher Investments and should not be regarded as personalized investment or tax advice or as a representation of investment performance. No assurances are made that Fisher Investments will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts may be, as accurate as any contained herein.
ABOUT FISHER
Fisher Investments 401(k) Solutions is dedicated to helping business owners and their employees successfully
reach their retirement goals. We help people better optimize their retirement savings opportunities and
understand their retirement plan options through in-person enrollments, ongoing education and our live-
person Help Desk.
Do you have questions about your finances or
retirement account? Don’t worry, we’re here to help!
Financial sucess requires maintenance and the Fisher
Investments 401(k) Solutions Service Team is your
go-to source for all things 401(k) and more.
We can help you with the following:
• Website questions
• Make changes to your 401(k) account
• Budgeting
• Retirement and financial planning
• And much more!
Don’t hesitate to reach out! Give us a call to schedule
your yearly “financial check-up” now.
We understand that planning for retirement can be
stressful, but we’re here to help. Simply call the 401(k)
Solutions’ Help Desk at 888-322-7586 and request
an appointment to speak with your Plan’s Retirement
Counselor.
Know Your Financial Vitals
Get Your “Retirement Check-up” Now
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