We hope you’re enjoying the Fall weather that has finally reached many parts of the country. We sure are as California has been breaking the limits of record high temperatures. Other limits are being broken as well. Matt is going to be breaking through the limits of his endurance as he spins for Challenged Athletes. Matt is embarking on a 4 ½ hour ride on a stationary bike to raise money for the Challenged Athletes Foundation. Click here to support Matt’s efforts with a donation to Challenged Athletes.
In our October newsletter we clue you in on a little-known way to break the limits of your 401(k) plan and offer some additional articles that we think you should read:
As we discussed in a previous post, your savings rate has a large impact on how soon you reach financial independence. If you’re looking to reach financial independence within 30 years, you need to save about 20% of your income. If you’re self-employed, the SEP IRA is a great vehicle for saving up to 25% of your income in a tax-sheltered retirement account. But if you’re an employee making more than $90,000 per year and have a 401(k) plan with a maximum contribution limit of $18,000, how do you save more than 20% of your income for retirement?
This past quarter was again full of market moving headlines from additional news about China’s economy to the Fed’s stance on interest rates to Volkswagen’s corporate malfeasance. These headlines create volatility in the markets which news agencies sensationalize with more headlines like “Dow plunges 200 points.” How many times have you seen that headline?
Smart investors expect that volatility and let it work for them instead of worrying about it.
These are the third quarter returns for seven broad asset classes:
Most major asset classes experienced significant declines in the third quarter. The S&P 500 was down over 7%, international markets were down more than 10%, commodities and real estate also experienced declines, while bonds were one of the few asset classes that reported gains. If you’re invested in a diversified portfolio as you should be, your bond holdings would cushion the declines your portfolio experienced in other asset classes.
For 2015 year-to-date, returns are as follows:
Most market indices are down for the year, but we expect this is going to happen at some point, right? The market doesn’t just go up. The silver lining in this market is that you should expect better returns going forward. And if you’re still investing for the long term, this market presents a good opportunity to buy at low prices.
Josh Brown, one of Wall Street’s most “social” advisors recently said this about market volatility that we want to highlight:
“There are two very important things about stock investing that most people forget when turmoil shows up. The first is that expected future returns are rising when the market is falling. The second is that preserving the nominal amount of dollars you currently hold will not fund a retirement; only the preservation of purchasing power will. For this reason you’re actually taking a bigger risk by not maintaining equity exposure…Should this summer’s volatility persist, it would help to remind yourself that every day you endure it, you are earning the premium long-term returns that not all investors have the stomach for. That makes you the winner of a game that many others consistently lose.”
Sources: www.stockcharts.com. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Here’s our monthly compilation of interesting articles and videos designed to keep you informed and engaged in the areas of personal finance, the economy and life. We hope you enjoy this month’s edition. Please send us your thoughts on this month’s articles and suggestions for future posts.
9 Reasons Why You’re Not A Millionaire Yet
Why Doing What You Love Makes Smart Business Sense
Setting Aside Shame and Blame in Financial Decisions
How to Be Richer in Retirement Without Saving More Money
Americans aren’t financially dumb, we just misbehave
3 things you should never do with a 401(k)
“You can measure your worth by your dedication to your path, not by your successes or failures.” – Elizabeth Gilberg
As always, we hope you have found this edition to be of value, and we look forward to hearing about your personal limits that are being broken during the last quarter of 2015.
All the Best,
The Illumination Wealth Team
The opinions and forecasts expressed are those of Matt Rinkey, President of Illumination Wealth Management (IWM) and may not actually come to pass. Mr. Rinkey’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Illumination Wealth services. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of IWM’s services. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Rinkey or Illumination Wealth nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Entities including, but not limited to IWM, its officers, directors, employees, customers and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. The analysis contained is based on both technical and fundamental research. Although the information contain is derived from sources which are believed to be reliable, they cannot be guaranteed. Past performance is never a guarantee of future results.