Broker Check

July Newsletter

July 5, 2019


“Remember, Money Won’t Make You Happy, But It Will …” 

At the half-way mark of 2019, we can take some solace in the fact that the aggregate managed portfolio of globally diversified equity and income investments has performed very well, despite continued global volatility and growing headwinds. Our aggregate results are summarized in the following chart for the period ended June 30, 2019:

The take-away from these numbers (as we have preached for years), is that short periods of time are generally misleading and not indicative of longer-term trends and expectations. Having said that, you can see that the drop in equity market values in December 2018, resulting from the Federal Reserve raising interest rates, skewed the one-year equity and income portfolio results.  Now that December 2018 is in the rear-view mirror, the year-to-date 2019 numbers look spectacular, as a result of the Federal Reserve hinting that further rate increases will not occur in 2019.  Instead, rates may be lowered in response to a perceived global economic slowdown from the effects of trade wars and geo-political saber rattling. Results from both June 2019 and the six-month period ended June 30, 2019 reflect market highs that have not been seen in decades.  The take-away from the ten-year numbers is that over time the results are more in-line with expectations based on growing corporate profits and generally low levels of interest rates from global central bank stimulus programs. The ten-year average total portfolio return of over eight percent is in line with long-term equity returns of eight to ten percent and income portfolio returns (with low inflation) of around four to five percent.  Seven of the last ten-year periods produced positive annual returns ranging from 4.54 percent to 20.04 percent.  The three loss years ranged from -0.90 percent to -4.41 percent.

A big part of both current and long-term results is the cash from dividends and interest that flows into all accounts on a regular basis. The current projected cash flow from the aggregate managed portfolio is a 4.8 percent annual rate. That blended rate is comprised of equity portfolio dividends of roughly five percent, alternative income portfolio dividends of 5.5 percent and the CD/bond ladder interest receipts of 3.2 percent.

Much of the year-to-date portfolio return comes from “selling high” in all accounts that are either in or near retirement or other distribution phases. Those gains were used for either outright distribution or were re-invested into the income portfolio for future distribution. In this process, all accounts have been re-balanced in line with each client’s Investment Policy Statement. In many cases, individual portfolios have been “tactically” re-balanced to preserve principal in light of warning signs of a market “pull back” from recent all-time highs and a “wait and see” attitude based on how the trade wars, interest rate expectations  and geo-political events play-out over the next year or so.

As of June 30th, the aggregate portfolio is invested roughly forty-eight percent in the globally diversified equity portfolio and roughly fifty-two percent in the income portfolio of alternative income securities and the CD/bond ladder. Many of our clients have requested that portfolios be invested for stability and not-so-much for growth in the current environment. At the same time, younger and more aggressive clients have opted to stay invested at their higher Investment Policy Statement equity portfolio levels. Please contact us directly if you want to review your individual portfolio allocations.

All this analysis brings us to the underlying reasons each client has for having us manage their money. Our goal has never been to “make you rich”. As “goal based” advisors, our job is to help you achieve your goals for your money; be it a comfortable retirement, sending kids to college, buying a business, taking a trip around the world, or even leaving something behind for your family or your favorite charity. As such, each client portfolio is actively managed without using robots or some magic formula. In this process, we continue to “hit a lot of base hits” without “swinging for the fences”. Along the way, we want you to achieve your goals but to do so without wild roller coaster rides. Our clients continue to tell us that they sleep easy with our style of risk management. We hope you all agree!

We hope that you celebrated our Nation’s Independence Day yesterday and appreciate the opportunities to meet your financial goals by participating in the current economic growth.

As always, please call us if you have any questions.



Stephen Wheeldon, CFP