Words: More words

401(k) IN FOCUS

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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

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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

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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

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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.

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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

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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