Advice From Retirees: Learn From Their Mistakes

September 22, 2010

The market drop in 2008 was a very unpleasant events for retirees, or near retirees. The strong market in 2009 was perhaps equally unexpected. Merrill Lynch Wealth Management did a survey of affluent retirees in early 2010 to find out how they were coping. The insights are important.

Surprisingly, given the opportunity to do it all again, roughly half (51%) of retired respondents indicated that they would have focused more on their “life goals” and less on “the numbers” and on hitting a specific nest egg dollar amount when planning for retirement, while the remaining respondents (49%) indicated that they would have focused more on “the numbers.”Retirees who wished they had focused more on their “life goals” indicated that they would have spent more time determining how they wanted to live in their retirement years (38%) and based their retirement income needs not just on a number that would sustain them but on one that would help them live their ideal lifestyle during these years (13%). Additionally, 8 percent would have created a plan to better support their philanthropic missions. Among those who indicated that they would have focused more on “the numbers,” 23 percent wished they had started working with a financial advisor earlier in life and 18 percent would have given up more luxuries in order to reach their retirement goals. Among all retired respondents, three out of 10 (31%) worked with a financial advisor when planning for retirement, though, in hindsight, more than half (55%) wished they had started doing so sooner.

I find it quite enlightening that among the group most focused on life goals, they really wished they had spent more time figuring out what they wanted to do in retirement and then saved enough to live their ideal lifestyle and not just enough to get by. Among the group focused on the numbers, a significant chunk wished they had started working with a financial advisor earlier-and for those already working with a financial advisor, a majority wished they had started working with an advisor sooner.

In short, most of the retirees wish they had saved more and started working with an advisor earlier. For advisors, the implications are clear: push clients to save more and to focus on retirement much earlier.

Leave a Comment » | Retirement/Saving | Permalink
Posted by Mike Moody

Gold Back in Focus

September 22, 2010

Gold is making headlines again, although it has been a pretty good performer for quite some time. Some of the attention comes about when any asset goes to new highs, but gold is also getting attention because of the Fed’s statement yesterday. A number of observers noted that Fed balance sheet expansion could lead to a weaker dollar and higher gold prices, while others, of course, disagreed. Since I am not an economist, I have no idea whose side to take in the argument, but gold has already made its decision.

Click to enlarge. Source: Yahoo! Finance

The problem with gold, from a portfolio point of view, is that it is a commodity. It’s never clear how to incorporate commodities into a strategic allocation, because sometimes commodities rock and other times they are terrible performers for years at a time. If they are included in a strategic allocation at all, they are typically included as a small 5-10% slice. In that small role, they can neither hurt you or help you much.

Tactical asset allocation does not suffer from this same problem. When commodities are strong, they are included in the portfolio; when they are weak, they are not. Our Global Macro separate account, for example, has held precious metals for most of the period shown on the chart above. That doesn’t mean we are gold bugs or that we have expectations about what the dollar or the economy will do. We own assets because they have powerful relative strength-and we will exit them unceremoniously as soon as that ceases to be the case. Asset class rotation allows a portfolio to have significant exposure to an asset class during times when it potentially can do some good, and tries to avoid exposure when an asset class appears to be dead money.

To receive the brochure for our Separately Managed Account strategies, click here. Click here for disclosures. Past performance is no guarantee of future returns.

Leave a Comment » | Markets, Tactical Asset Alloc, Thought Process | Permalink
Posted by Mike Moody

Dorsey Wright Polo Shirts Through November

September 22, 2010

As we head into the final months of the year, we want to thank all of our clients for their business. 2010 has so far been a very good year for our portfolios and we think it could well be the beginning of a strong multi-year move for relative strength strategies.

As a way of thanking you for your business, we will be offering a polo shirt, embroidered with the Dorsey Wright XO logo, for advisors who open new separately managed accounts with us from now until the end of November.

www.companycasuals.com

To receive the brochure on our Systematic Relative Strength portfolios, please click the image below.

Leave a Comment » | Uncategorized | Permalink
Posted by Andy Hyer

High RS Diffusion Index

September 22, 2010

The chart below measures the percentage of high relative strength stocks that are trading above their 50-day moving average (universe of mid and large cap stocks.) As of 9/21/10.

The 10-day moving average of this indicator is 89% and the one-day reading is 93%. After pulling back to the middle of the distribution in August, this index has risen sharply in recent weeks.

Leave a Comment » | Markets | Permalink
Posted by Andy Hyer