Before I get started, I wanted to remind everyone of this week’s webinar. It will be January 15, 2015 at 1:00 pm EDT and will cover How to Properly Illustration and Sell EIUL (Equity Indexed Universal Life) Policies. To sign up for the webinar (if you can’t make it live, sign up anyway and view it on recording), click on the following link: https://attendee.gotowebinar.com/register/4630734321463222530
There are two questions everyone (investors and advisors) should be asking themselves.
1) Is volatility back in the stock market?
2) How do advisors and investors cope with that volatility?
Let me answer 2) by showing you a very powerful chart showing convertible bond fund returns in 2014. You can help clients avoid volatility by using tactical money managers who have proven they can avoid downturns in the stock market. The following chart shows green lines. They are times when my favorite tactical manager went to cash in 2014 (something most advisors and clients wish they had the foresight to do).
A buy and hold portfolio would have given clients heart burn in 2014. At the end of the day, because tactical management can avoid many downturns in the market, the net result can be higher average rates of return with much less volatility (less stress for the client and for the advisor). To learn more about this low drawdown tactically managed strategy and others, go to http://www.pomplanning.net/conservative.
Well, is volatility back? We have been in an unnaturally long period of low volatility (VXX). That appears to be changing. Why?
–Interest rates are going to start rising–rising rate should increase volatility in the markets.
–Oil prices–oil prices are expected to remain low for 2015. While counter intuitive to the average person, the experts say low prices might cause a volatility spike in 2015.
–Weakness in Europe and Japan–look at the following chart. It indicates that Japan is in a recession (which won’t help the overall market create steady growth).
–Global turmoil–look what just happened in Paris with 12 dead journalists. With the rise of ISIS and with increased terrorist activity that may lie ahead, it’s no wonder the markets are full of tension (which causes volatility).
–Russia–this is another wild card. Who knows what Russia will do next? More invasions? 17% interest rate hikes? Supporting global terror?
When there is turmoil in the world, when there are clear indicators that affect world economies, the market will be volatile.
The question for advisors and investors is whether they will choose to be buy and hold investors or whether they will make an attempt to avoid downturns in the market?
For those who choose to try an avoid downturns in the market, how will that be done?
Will investors try to time the market on their own (something the DALBAR Study proves is a sure fire loser).
Will advisors try to figure out on their own or with the help of a B/D when is the appropriate time to go to cash?
Good luck to consumer and advisors is my thought. For my money, I prefer to work with tactical managers who have proven over the years that they can avoid many of the downturns in the market and ones that have a track record of not having a down year in 23 and 18 years respectively.
For advisors interested in using the best tactical money managers in the industry, simply go to http://www.pomplanning.net and sign up for a due diligence packet to learn more.
Roccy DeFrancesco, JD, CWPP™, CAPP™, CMP™
Founder, The Wealth Preservation Institute
144 Grand Blvd
Author of: The Doctor’s Wealth Preservation Guide; The Home Equity Management Guidebook; The Home Equity Acceleration Plan; Retiring Without Risk; Bad Advisors: How to Identify Them; How to Avoid Them; and Peace of Mind Planning: Losing Money is No Longer an Option.