2019 Stock Market Investment Strategies

Stock Market Investment Strategies & Tips for 2019 – and Beyond

by Paul Partridge and Ian Welham

Amazingly, we’re more than three quarters of the way through 2019.

Did you set some financial goals back in January? If so, now is a good time to take stock of your portfolio and see if your money is working for you.

The S&P 500 is up 18 percent year-to-date as I write this. However, there have been some bumps in the road. The index tanked 6 percent in May and another 6 percent in August, for example. 1 Volatility seems to be on the rise.

If your portfolio has been underperforming, you still have time to hit your targets. Whether your aim is to beat the market, pay down debt, or reduce risk, there’s still time to make 2019 a financial success.

Need help? Download this free financial and retirement planning guide.

In an effort to help you fine-tune your investment strategies, my partner Ian Welham and I will each share our two favorite stock market strategies and tips for 2019 – and beyond.

Let’s get started.

Ian Stock Market Strategy #1: Know the real rate of return of your portfolio

As an accountant, there’s one thing that drives me bonkers. When people come to see us for a retirement analysis, I’m shocked by how many don’t know what their money is earning.

Real estate is different. Most homeowners can recite exactly what their home is worth, what they paid, and precisely how much equity they have. For some reason, with their investments, the numbers get a bit murkier.

I typically ask, “What kind of returns has your trading strategy been getting over the last five to 10 years?”

Far and away the most common answer is 10 percent. I don’t know if that’s a number they hear on Squawk Box or from a know-it-all neighbor. But it’s amazing how many people say 10 percent.

But when I review their statements, the total return is seldom 10 percent. More often it’s closer to four or five percent.

Financial research company DALBAR discovered a similar pattern. Every year since 1994, DALBAR tracks how average investors fair vs. common stock market benchmarks.

For example, last year the S&P 500 suffered a loss, losing 4.4 percent. In contrast, the average investor lost 9.4 percent, according to DALBAR – more than twice as much. 2

That’s the short term picture. If you look longer term, the numbers get worse. DALBAR reports that the average investor underperforms the stock market by nearly 6 percent a year.3

That’s a massive difference – especially when compounded over the long term. Why the big disparity?

Presumably it’s because average investors are not very good at market timing. They tend to buy at the high and sell at the low. Rather than following a disciplined system, they’re buying and selling stocks emotionally.

This is not a criticism. It’s completely understandable, and quite common. But few people realize it – or grasp the impact it can have on investment performance.

So go through your statements and do the math rather than just assume your index funds match the benchmark returns. You may be surprised. (Don’t forget to subtract fees.)

And by far the biggest factor that impacts results is Paul’s first tip.

Paul Stock Market Strategy #1: Understand how much investment risk you’re taking

The case for adopting a buy-and-hold investing strategy goes like this:

If you invested $1,000 in stocks 100 years ago, you’d be sitting on almost $14 million today. 4


Except no one talks about the bumps in the road.

Namely that you would have spent almost half of your time – 46 years – holding your breath while waiting to get back to previous highs. 5

In four consecutive years starting in 1929, the Dow lost 17%, 34%, 53% and 23%. During the entire decade of the 1970’s, the Dow gained 38 points. Total. In 10 years. 6

Japanese buy-and-hold investors have been waiting three decades to get back to breakeven. Even after a strong run-up the last few years, the Nikkei is still 43% below the all-time high set in 1989. 7

Looking back, it’s easy to say we would have held on through these stomach-churning events.

But most human beings will not stay in an investment that does nada for 30 years. Or worse, goes backwards.

As retirees and pre-retirees, time is not on our side. We can’t afford to wait a decade – or three – for our savings to grow. Our needs are more immediate.

But many Baby Boomers may be taking too much risk for their age – and for the return they’re getting.

I commonly meet men and women hoping to retire in two years who have 70… 80… even 90 percent of their savings in the stock market.

Even if they’re not active trading, this may be too much risk given their situation – risk they may not even be aware of. Here’s what I mean.

Imagine you have $1.5 million in your IRA and you’ve got 70% of your assets currently in the stock market. In 2008 the biggest drop, highest point to lowest point, was a 53 percent drawdown. 8 A 53% drop in stock prices would result in a $556,500 loss for you.

You don’t have to be in extremely risky mutual funds to be exposed to losses like this. Even target-dated funds, can have large drawdowns when the market experiences a correction.

For example, the Vanguard 2020 fund registered a 44% drawdown during the financial crisis.9 The Fidelity Freedom® fund had a 47% loss. 10

“There is a common misconception among many target-date holders that the portfolio is completely de-risked at retirement, and that simply isn’t true,” says Robert R. Johnson, professor of finance at Creighton University’s Heider College of Business, as quoted in the Wall Street Journal. 11

Sadly, we see this dynamic all the time. It’s one of the most common problems that we help people deal with. They have a false belief that they’re conservative or low-risk when in fact their nest egg could be exposed to significant risk in the next market selloff.

We use a simple three-step process to help retirees figure out and manage risk. Whatever approach you use, it’s important to protect the money you’ve worked so hard to save. And the first step to protecting wealth is managing risk.

To be clear, I’m not suggesting zero risk. Most of us need some market risk in our portfolio as a hedge against inflation – especially medical inflation as we age. But it’s important to understand:

  1. Exactly how much risk exposure we currently have
  2. What’s the appropriate risk for our age, situation and financial goals
  3. How to grow money without taking on unnecessary risk

Ian Stock Market Strategy #2: Pay attention to taxes

Have you ever considered Roth conversions?

As an accountant I’d say this is probably the most overlooked and underutilized tax strategy that’s available to everyone.

If you have a traditional IRA, you can convert all or part of it to a Roth IRA. You pay taxes on the conversion, and the money then grows tax-free in the Roth IRA. You pay zero tax on Roth withdrawals as long as you meet certain requirements.

And here’s a biggie: unlike traditional IRAs and 401(k)’s, there are no Required Minimum Distributions (RMDs) with a Roth. You have 100% control over when to take distributions. And beneficiaries pay zero taxes on inherited Roth IRAs. 12

Most people are aware of or have heard the term Roth conversions, but don’t understand how they work. Or the power they have to potentially reduce taxes in retirement.

Sadly, not enough CPAs discuss the possibility of Roth conversions with their clients (most accountants are focused on simply getting through this year’s tax deadline). The talking heads on TV don’t mention it because it’s not a sexy enough topic.

Roth conversions are not suitable for everyone. For example, it’s possible conversions could raise your Medicare Part B premiums or Social Security taxes, so make sure to work with a tax professional. For those who qualify, the key is knowing when to get started (you don’t want to wait until you’re 65). Also important: how much to convert per year (if you convert too much or too little, you’ll lose the benefit). Let’s look at a hypothetical example.

Jeffrey is 63. His combined liquid assets are a little over $4 million. He needs $10,000/month of after-tax spendable income in retirement. If he stays on his current path, he’ll be in the 24 percent tax bracket from 2019 to 2026, the first year his RMDs begin. RMD distributions will quickly push him into the 32 percent tax bracket, assuming a 6 percent growth rate for his assets.

By working with his CPA and doing Roth conversions, Jeffrey should be able to stay in the 24% tax bracket in the early years, and eventually lower his tax bracket from 32 percent to 12 percent later in life. More significantly, he can pass on potentially up to $3.2 million to his family through tax savings.

Yes, you read that correctly. Over $3 million in potential tax savings.

Roth conversions are just one tax strategy retirees can use to limit or reduce the taxes they pay in retirement. There are many more.

If your accountant or attorney or financial planner won’t talk to you about them, you might want to find a professional who will. It can make a tremendous difference to you, your spouse, your family, and the charities you support.

Paul Stock Market Strategy #2: Have a plan beyond “buy and hold”

Bernard Baruch was a famous Wall Street investor and financier. When asked how he got to be so rich, he replied, “By selling too soon.” 13

We’ve just lived through perhaps the best 10-year period ever for U.S. stocks. 14 Stock prices are near all-time highs. Company earnings remain mostly positive.

Today, many men and women we meet are hopeful that the bull market continues. At the same time they admit to being concerned about a stock market downturn. They realize we’re due for a correction, but don’t want to miss out on any potential gains.

In essence their plan comes down to this: crossing fingers and hoping for the best.

Dear reader I think you will agree: hope is not a solid plan.

I remember in 2008 when investors were coming into our office in tears – sobbing over their investment losses. They were panicked about running out of money in their most vulnerable years, and desperate for help.

The 2008 meltdown came without warning. After a long run-up, most investors were expecting higher highs. It was a surprise when stocks dropped 40 percent in 60 days. The stock market fell faster than investors could react. People stopped reading their monthly statements: they couldn’t bear to look at the numbers.

Will it happen again? If history is any guide, it’s quite possible the market will be lower a year from now than it is today. That’s why now could be the best time to adjust your plan. It’s prudent to address dangers before they actually occur — because it’s too late once they happen.

Perhaps you’re thinking, “I’ll be okay. 2008 was devastating. But since then we’ve had a solid 10-year run. I’ve recovered my losses and then some.”

The question is, do we take the gift we’ve been given (a decade of uninterrupted gains) and harvest some of our profits to fund a comfortable retirement? Or do we continue to roll the dice, risking a lot in hopes of pocketing a bit more?

Remember, “gains” are only paper profits until you sell.

The answer may depend on your age. If you’re at or nearing retirement age, you’re about to experience the biggest financial shift of your life.

The focus changes from ‘How much can I save and grow my nest egg?’ to ‘How do I protect what I have and maintain my lifestyle – without a weekly paycheck – even if I live to age 110?’

Accumulation is no longer the end goal. Distribution is more important now. How are we going to safely spend down the money we’ve spent a lifetime saving? How are we going to ensure it doesn’t run out?

Making these decisions requires proper planning. A wrong move at this point can be doubly costly because we don’t have time to recover.

Famous Dallas Cowboys coach Tom Landry said, “Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan.” 15

The right financial advisor can help you make a plan – and stick to it.

We suggest the first step is to arm yourself with information. If you’re exploring retirement, you’re welcome to download the financial and Retirement Planning Guide available for free at our website. Just click here to get your copy.

Meanwhile we wish you successful trading for the remainder of the year – and in 2020 and beyond.

1 https://www.marketwatch.com/investing/index/spx

2 https://www.dalbar.com/Portals/dalbar/Cache/News/PressReleases/QAIBPressRelease_2019.pdf

3 https://www.cnbc.com/2019/07/31/youre-making-big-financial-mistakes-and-its-your-brains-fault.html

4 https://www.calculatorsoup.com/calculators/financial/investment-calculator.php

5 https://www.macrotrends.net/2324/sp-500-historical-chart-data

6 https://theirrelevantinvestor.com/2019/03/13/the-twenty-craziest-investing-facts-ever/

7 https://fred.stlouisfed.org/series/NIKKEI225

8 https://www.google.com/search?sa=X&tbm=fin&sxsrf=ACYBGNTRS-3eTKPWUaPDOa_XNiWSJDUxww:1571788312836&q=INDEXSP:+.INX&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyevq5uEYEB1gp6Hn6RQAAItD1MEkAAAA&ved=0ahUKEwjOpbHgh7HlAhUhm-AKHTWQAJwQ0uIBCKkBMBE&biw=1900&bih=971&dpr=1#scso=_KZavXffRIJCJgge-4bDAAg7:0





11 https://www.wsj.com/articles/what-weve-learned-about-target-date-funds-10-years-later-11557108540

12 https://money.usnews.com/money/retirement/iras/articles/now-is-the-time-to-convert-your-traditional-ira-to-a-roth

13 https://en.wikiquote.org/wiki/Talk:Bernard_Baruch

14 https://www.cnbc.com/2019/03/15/the-stock-markets-gain-in-the-last-10-years-is-one-of-its-best-runs-since-the-1800s.html

15 https://www.brainyquote.com/authors/tom_landry

3 Steps You Can Take to Minimize Risk

The year is flying by. It may be hard to believe, but we’re already halfway through 2019. Did you set financial goals at the beginning of the year? If so, how are those goals looking at the halfway point?

The good news is you have six more months to hit your objectives. Whether your goal was to save more money, pay down debt, or simply organize your financial strategy, you still have time to make it happen before the end of the year.

This also may be a good time to review your retirement plan. Generally, the financial markets have had a good year. As I write this, the S&P 500 is up more than 13 percent year-to-date. However, that hasn’t come without turbulence. The index lost nearly 5 percent in May.1

If you’re approaching retirement, it’s important to periodically review your retirement strategy to make sure it aligns with your risk tolerance and time horizon. If you suffer a loss, you may not have time before retirement to recover. Below are a few tips to help you reduce your risk exposure in the second half of the year.

Rebalance your allocations.

It’s possible that your target allocation is perfect for your risk tolerance and time horizon. However, it’s also possible that your actual allocation doesn’t match your target.

Investment portfolios naturally become unbalanced over time. Some asset classes perform better than others. Some increase in value while others decline. This happens all the time with investments and financial markets.

However, as asset classes increase and decrease in value, they also become unaligned with your target allocations. For instance, an asset that was supposed to account for only 5 percent of your allocation, may account for much more if it increases in value. Similarly, an asset that declines in value may account for much less than its target percentage. The result is a portfolio that doesn’t match your desired allocation and may even have more risk than you want.

Fortunately, you can correct this issue by rebalancing your allocation back to the desired target. In fact, it’s good to do this regularly, even on a quarterly basis. Many financial professionals can set up your account to automatically rebalance so you know you’re always aligned with the right strategy.

Shift to more conservative assets.

When was the last time you reviewed your allocation? If it’s been a while, you may need to do more than rebalance. It could be time to change your allocation altogether.

As people get older and approach retirement, they tend to become more conservative. This is because your time horizon has shortened. You have fewer years until you retire and actually need to use your money. A more conservative allocation reduces the odds of a sizable loss. It helps you protect what you have while still potentially growing your assets.

Review your strategy and discuss it with your financial professional. Is it time to move to a more conservative allocation? If so, consult with your financial professional to determine what types of strategies are right for you.

Consider an annuity.

Finally, you may want to consider additional risk protection tools. One possible tool is an annuity. Some annuities, like fixed indexed annuities, offer upside potential without the downside risk that exists in the equity markets.

With a fixed indexed annuity (FIA), you receive interest that is tied to the performance of an external index, like the S&P 500. If the index performs well, you receive a portion of the upside performance as an interest payment. If the index performs poorly and loses value, you don’t receive interest, but you also don’t lose any money. In other words, your principal is protected from loss.

An FIA can be an effective tool to minimize risk in your portfolio. There are a number of different FIAs available, so it’s important to explore your options. Your financial professional can help you determine if an FIA is right for your circumstance.

Ready to reset your strategy for the second half of 2019? Let’s talk about it. Contact us today at Sage Financial Partners. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, no representation is made as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice, or specific advice for your situation. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.



18924 – 2019/5/29

4 Trends That Are Changing Retirement

There was a time when retirement was fairly simple. Workers stayed with one employer for most of their career. When they decided to retire, they could enjoy a healthy pension from their employer and Social Security benefits from the government.

Today’s retirees face a much different set of circumstances. Many employers no longer off pensions. Instead, workers are responsible for funding their own retirement by contributing to 401(k) plans and other retirement accounts. Social Security is still a valuable resource for retirees, but it’s unlikely to fully fund a comfortable retirement.

There are other trends and changes that are creating challenges for future retirees. Below are a few of the biggest. If you haven’t planned for these issues, now may be the time to do so.


Today’s retirees are living longer than ever. According to the Society of Actuaries, there’s a 50% chance that one member of a 65-year-old couple will live to at least age 94. There’s a 25% chance that one spouse will live to 98.1 If you retire in your mid-60s, your retirement could last 30 years.

Usually, a long lifespan is a good thing. However, it can create some planning issues in retirement. The longer you live, the longer your money has to last. If you spend too much in the early years of retirement, you may not have enough left in the later years.

Rising Health Care Costs

According to Fidelity, the average 65-year-old couple will need approximately $285,000 to pay for medical expenses in retirement.2 Think that number sounds high? Consider the costs of items like premiums, deductibles, and co-pays.

You’ll likely have Medicare coverage in retirement after age 65, but Medicare doesn’t pay for all medical expenses. Your coverage depends on your specific plan. While some plans are robust, others may only cover the basics, like hospitalizations and visits to the doctor.

You can prepare for significant healthcare costs by putting away more money today. You may want to consider a health savings account (HSA), which allows you to grow assets tax-deferred and make tax-free withdrawals for qualified medical expenses.

Job Changes

The average baby boomer has held nearly 12 jobs in their career. Granted, nearly half of those are between ages 18 and 24. However, that’s still means the average baby boomer held nearly six jobs after age 24.3 That’s a far cry from the time when people worked for one employer for nearly their whole career.

A new job usually means a new 401(k) plan, and it may also mean an old 401(k) balance with the former employer. Research suggest that nearly 41% of people cash out their 401(k) plan when they switch jobs.4 Those cash outs can be costly. They’re taxable and may result in a 10% early distribution penalty.

Changing jobs may be the norm these days but cashing out your 401(k) plan doesn’t have to be. The next time you change jobs, explore all your options, including rolling your plan into an IRA. If you cash out, you may expose your retirement assets to unnecessary taxes and fees.

Family Dynamics

Family structures have been changing in America for decades. From 1960 to 2016, the percentage of children who live with married parents dropped from 88% to 69%.5 Blended families are on the rise, with more kids living with single parents or stepparents.

These changing dynamics can complicate retirement plans. If you remarry, you may not only add a new spouse, but also new children who need support. You and your new spouse may also have different views on retirement or different approaches to supporting children.

Estate planning can also be a concern in a blended family. You may want to protect your spouse, but also leave a legacy for your children from a previous marriage. It often takes careful planning and delicate conversations to address these issues. A financial professional can help you and your new spouse develop the right strategy for your goals.

These trends demonstrate why it’s more important than ever to have a retirement income plan: money you can count on to cover expected – and unexpected – bills. A financial professional can help you determine answers to questions such as, “Do I have enough saved?” and “Am I going to be okay?”

Ready to tackle the challenges you might face in retirement? Let’s talk about it. Contact us today at Sage Financial Partners. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.

1 https://www.fidelity.com/viewpoints/retirement/longevity

2 https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

3 https://www.bls.gov/news.release/pdf/nlsoy.pdf

4 https://www.workforce.com/2018/02/14/retirement-account-bank-account-employees-cash-401ks-record-numbers/

5 https://www.census.gov/newsroom/press-releases/2016/cb16-192.html

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, no representation is made as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice, or specific advice for your situation. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

18768 – 2019/4/11