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We'll show you how to get a better understanding of the markets and become a confident, competent investor. And we lay it all out for you in plain English (well, a Southern variety of English, anyway). Hey, you work hard for your money - learn how to make your money work hard for you!
The Markets and Your 401k:
A Look Back, A Look Ahead
2016 was certainly a gut-wrenching year for long term investors. The stock market stumbled right out of the gate, falling over 11% in the first quarter. It recovered quickly, though - by April was in positive territory for the year.
The Brexit vote, our elections and a couple of global issues caused some sudden dips that kept investors on edge. But each time prices fell, buyers stepped in and pushed stocks higher. When the smoke and dust had cleared on the last day of trading, the S&P 500 had recorded a nice 9.5% gain for the year.
Long term bond funds soared higher the first half of the year, but quickly came back to earth in the second half. After being up almost 19% in July, the funds finished 2016 down about 1%. As they steadily fell throughout the second half, a lot of market gurus were proclaiming the death of the long running bull market for bonds.
Here are the 2016 performance numbers for a few of the market sectors we keep a close eye on:
> RETAIL: +2%
> FINANCIALS: +20%
> ENERGY: +25%
> COMMODITIES: +18%
> HOMEBUILDERS: -1%
> GOLD: +8%
For trend following index investors like us, 2016 was a very profitable – if sometimes scary – year. What should we expect in 2017? Despite the slew of market predictions that all the gurus are coming out with now, no one really knows.
What are the charts telling us about 2017?
* Stocks are in a valid uptrend, but slightly extended right now. A pullback would be healthy for the trend, but there’s no reason to think the uptrend can’t continue.
* Long term bond fund prices are approaching a fairly solid support area on the monthly chart. If that support fails to hold, it will mean more losses to come for the funds…and more fuel for the bond ‘dooms-dayers’!
* The retail and homebuilders sectors are a little worrisome, mainly because they are such big drivers to our economy. The charts show them both trending sideways to slightly higher, but hovering around their 200-day moving averages. That’s not exactly bullish.
We are a tad defensive right now with our investments just because this bull market has lasted so long (almost 8 years!). But as trend followers, we have to keep our portfolios aligned with the markets’ major trend regardless of what we think or how we feel. 401k investors only make moolah when the markets are rising, so we have to be in – despite those gut-wrenching moves!
NEWS YOU CAN USE
"How 401k Plans Will Change in 2017"
"Some Fund Companies Missed
the News About Falling Fees"
"Hedge Fund Love Affair is Ending
for US Pensions, Endowments"
"Introducing the Morningstar Analyst Rating for ETFs"
"IRS Announces 2017 Retirement Plans
Contributions Limits for 401(k)s"
VIEWS YOU CAN USE
"Top 3 Advantages of Managing Your Own Money"
from The Motley Fool
"The Best Personal-Finance Products, Services,
Resources and Advice of 2016"
"Hedge Funds Slow to Adjust
Champagne Tastes to Beer Budgets"
"The Case Against Traditional Indexes"
"7 Retirement Planning Steps Late Starters Must Take"
Winter Reading List
Hunker down during the cold, gray days of winter with any - or all - of these 4 investing classics!
Learn to become a smarter investor!!
>>>>> And just so you know:
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Here are a couple of very simple retirement calculators courtesy of our friends over at Calculator Pro.
Here are the figures we used:
> Required Annual Income: we put in what we're making now (we don't buy into that "plan to spend 70% of your working income in retirement" idea!)
> Years until Retirement: we shot for age 65, but who really knows, right?
> Years after Retirement: we sure hope to have 20 good years of doing what we want to do!
> Annual Inflation: we used 3.5% (maybe go a tad higher to be safe?)
> Annual Return on Balance: we used 7% (maybe go a tad lower to be safe?)