Atlantic Capital Management

Atlantic Capital Management (122)

Friday, 29 March 2019 14:27

Could Assumptions Harm Your Retirement Strategy?

Submitted by

Three common misconceptions to think about.

1 – Assuming retirement will last 10-15 years.

When Social Security was created in the 1930s, the average American could anticipate living to age 58 as a man or 62 as a woman. By 2014, life expectancy for the average American had increased to 78.6. That said, an average like may bely the fact that many retirees could live well into their nineties or beyond.1,2

Assuming you will only need 10- or 15-years’ worth of retirement money could be a big mistake.

2 – Assuming too little risk.

Holding onto your retirement money is certainly important, but so is your retirement income and quality of life. While overall inflation has been below 3% for most of the past 10 years, your personal inflation rate may be higher. In that situation, your dollar gradually buys less and less. If your income doesn’t keep up with inflation – essentially, you end up living on yesterday’s money.

For this reason, a flexible retirement strategy will likely factor in many situations and scenarios; you cannot plan for every single scenario, but considering many possibilities may give you and your financial professional numerous options down the road.

3 – Assuming you will be in excellent health. While it’s true that we lead healthier lives than our ancestors and that medical science and awareness of fitness and nutrition have improved and extended many American lives, that improvement doesn’t cover every issue that comes with advanced age. Extended-care issues can sap away retirement funds.3

Recent findings by the U.S. Department of Health and Human Services offer some perspective: over a quarter of all people who have turned 65 between 2015-2019 are probably going to need $100,000 of extended care, while 15% of that same group is looking at $250,000.3

For these reasons, a retirement strategy should include some thinking about paying for extended care of this sort. Yes, Medicare can help you with the basics, but an insurance strategy that can accommodate longer hospital stays and care should also be a part of your thinking.3

Remember that good strategies also change over time, and you will probably want some help along the way. Make time to discuss these common assumptions, and how to avoid them, with your retirement professional.
  

  

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.


Citations.

1 - ssa.gov/history/lifeexpect.html [2/19/19]
2 - pbs.org/newshour/health/american-life-expectancy-has-dropped-again-heres-why [11/29/18]
3 - kiplinger.com/article/insurance/T036-C000-S002-how-to-afford-long-term-care.html [1/31/19]

Wednesday, 20 March 2019 14:18

Strategic vs. Tactical Investing

Submitted by

How do these investment approaches differ?

Ever heard the term “strategic investing”? How about “tactical investing”? At a glance, you might assume that both these phrases describe the same investment approach.

While both approaches involve the periodic adjustment of a portfolio and holding portfolio assets in varied investment classes, they differ in one key respect. Strategic investing is fundamentally passive; tactical investing is fundamentally active. An old saying expresses the opinion that strategic investing is about time in the market, while tactical investing is about timing the market. There is some truth to that.1

Strategic investing focuses on an investor’s long-range goals. This philosophy is sometimes characterized as “set it and forget it,” but that is inaccurate. The idea is to maintain the way the invested assets are held over time, so that through the years, they are assigned to investment classes in approximately the percentages established when the portfolio is created.1

Picture a hypothetical investor. Assume that she starts investing and saving for retirement with 60% of her invested assets held in equities and 40% in fixed-income vehicles. Now, assume that soon after she starts investing, a long bull market begins. The value of the equity investments within her portfolio increases. Years pass, and she checks up on the portfolio and learns that much more than 60% of the value of her portfolio is now held in equities. A greater percentage of her portfolio is now subject to the ups and downs of Wall Street.

As she is investing strategically, this is undesirable. Rebalancing is in order. By the tenets of strategic investing, the assets in the portfolio need to be shifted, so that they are held in that 60/40 mix again. If the assets are not rebalanced, her portfolio could expose her to more risk than she wants – and the older she gets, the less risk she may want to assume.1

Tactical investing responds to market conditions. It looks at the present and the near future. A tactical investor attempts to shift the composition of a portfolio to reduce risk exposure or to take advantage of hot sectors or new opportunities. This requires something of an educated guess – two guesses, actually. The challenge is to appropriately decide when to adjust the portfolio in light of change and when to readjust it back to the target investment mix. This is, necessarily, a hands-on style of investing.1

Is it better to buy and hold, or simply, to respond? This question has no easy answer, but it points out the divergence between strategic and tactical investing. A strategic investor may be inclined to “buy and hold” and ride out episodes of Wall Street turbulence. The danger is in holding too long – that is, not recognizing the onset of a prolonged downturn that could bring losses without much hope for a quick recovery. On the other hand, the tactical investor risks buying high and selling low, for figuring out just when to increase or decrease a portfolio position can be difficult.

Investors have debated which strategy is better for decades. One approach may be better suited than another at a particular point in time. Adherents of strategic investing point to the failure of active asset management to beat the equity benchmarks. A 2018 Dow Jones Indices SPIVA Report noted that across the five years ending June 30, 2018, more than 76% of U.S. large-cap funds failed to return better than the S&P 500. A proponent of tactical investing might counter that by arguing that this percentage might be much lower within a shorter timeframe. Ultimately, an investor has to consider their risk tolerance, objectives, and investing outlook in evaluating both approaches.2

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  

Citations.

1 - money.usnews.com/investing/investing-101/articles/2018-07-25/whats-the-difference-between-strategic-and-tactical-asset-allocation [7/25/18]

2 - us.spindices.com/spiva/#/reports [2/5/19]

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