Stock Market

2016 Market Commentary

At the time of writing this, the Dow Jones Industrial Average is down almost 10% since January 1st, 2016. Couple that with “summer selloff”, plus the poor finish to 2015, and you have a trending pattern of declined growth in the equities markets. What does this mean to you? Well, the stock market is officially in a correction, haven dropped by more than 10% since December 29, 2015, but it is not yet in bear market territory. A bear market officially occurs when the stock market drops by more than 20%.

What should I do about my investments? Don’t panic! The worst thing to do in declining markets, assuming you have a well diversified portfolio, is to try and time the markets. It’s important to note that if you are considering selling into a down market, you also must figure out when to get back in. Unless you have a crystal ball, timing these decisions accurately, without negatively impacting your nest egg, is nearly impossible. Let’s look at some examples of how impactful such decisions can be.

In 2008, the S&P 500 finished down 37%. On a 500k investment, that equals approximately 133k of market loss in just one year. If you panicked and sold out of the equity markets at the bottom, you would have missed the 2009 returns of 26.5%, and 2010 returns of 15.1%.

Meaning, if you had just stayed invested throughout 08’ and the first part of 09’, then you would have made up your losses within a two year time frame. Had you sold and moved your money to a stable value fund within your 401k or cash, you still would not be back to even today.

As we have seen from the above, emotional investors rarely fair well in the stock market, and I think its fair to say we are all emotional when it comes to money. Investors are much more likely to beat the market, in my 15 years of experience, by working with someone acting as their buffer to emotional decisions we know can impact our life savings. Who is your buffer? If you are not already a client of The Farese Group, we encourage you to come in for a free retirement review and income distribution plan customized to fit your goals and needs.

In conclusion, here are some actions you can and should be taking in regards to your savings:

  • make sure your current portfolio is well diversified,
  • remember that markets are cyclical
  • make sure you have someone acting as your buffer throughout your pre-retirement and retirement years.
  • look for buying opportunities in a down market, as the goal is always to buy low and sell high.

This doesn’t have to be a terrifying experience, especially if you have a company like TFG helping you navigate these dangerous waters. Not only does TFG specialize in retirement and income distribution planning, we have a proven track record of helping hundreds of your peers over the past 15 years plan for and transition into retirement. Please give us a call to begin planning for your tomorrow – today!


Income Distribution

What Is Income Distribution Planning, and Why It’s One of The Most Important Principals of Retirement Planning?

There are two phases to investing, requiring specific knowledge in two very different strategies and/or areas of expertise.

Accumulation Phase: focused on, and specialized in, advising you on how to best save and grow your money for a retirement date that is well on into the future.

Distribution Phase: focused on, and specialized in, protecting the assets you’ve already saved, ensuring you’re able to live off of that money for the rest of your life; i.e., “replacing your paycheck” and/or “supplementing your gap in your income needs.

Each of the above require completely opposite investment goals and needs. As stated above, when in the accumulation phase, investors are looking for growth, most often have higher risk tolerances, and are saving disposable income for a future date. In comparison, investors in the distribution phase are looking for preservation, have lower risk tolerances, and are spending money that has already been saved.

During the distribution phase, there are additional factors investors must master such as: time horizon, investment objective, liquidity needs, debt retirement, monthly spending need vs. monthly income sources, wills, life/health insurance, and finally what financial instruments to invest in. Most Financial Advisors today (via nature of the industry) are focused on obtaining clients who are still in the accumulation phase with disposable income to invest, and primarily focused on growth as opposed to preservation.

This is completely different from a Financial Advisor whose primary expertise is working with individuals preparing for, transitioning into, or already retired. By definition, a retiree typically does not have disposal income to invest (extra money from paycheck to save in 401k for example). It’s much more common for investors nearing or reaching retirement, to have ALREADY saved up a lump sum of money, usually held in their 401k, IRA, and general savings. Investors such as these typically are not in need of stockbrokers with hot stock tips, but rather an expert in the field of income distribution planning.

The Farese Group’s custom planning software, in-depth data gathering process, intentional goal setting, and investment solutions will help in building your very own custom Income Distribution Plan. Since 2001, TFG has helped nearly 2,000 telecom and utility employees retire. With clients ranging in age anywhere from 50 years and older, all will eventually enter the distribution phase of investing – the point in time when you actually begin distributing the funds you’ve saved. Also since 2001, we have organized various workshops specifically for telecom & utility employees and retirees. Our workshops are free; no sales or investment pitches and no pressure. We review your company’s own summary plans, description of savings and pension plans, as well as, highlight what you need to know about retiring. We encourage you to bring your spouse and other co-workers who you feel may benefit from the information. After the complimentary dinner and presentation, you are welcome to ask questions that you may have about your specific situation or just enjoy the company of your coworkers. If a one-on-one meeting is more your speed, we are happy to set up a consultation in our Ridgeland office or one of our satellite offices in Little Rock or the Baton Rouge area.

Not only does TFG focus solely on retirement/income distribution planning, but with15 years of experience under our belts, we feel that our service provided is second to none. Our number one generator of clients is from referrals from our existing client base, and we take great pride in that fact.



Plan for The Worst, Hope for The Best

If you attended our client appreciation event in Jackson, MS earlier this year, then you might remember our prediction that a market pullback would occur within the next 6 months. These are not the kind of calls you want to be correct on, as the Dow dropped more than a 1,000 points on Monday, and equity markets seem poised for continued volatility.

Hopefully, you can take comfort in knowing that we’ve been prepared for such move for a while now. Furthermore, when creating our clients income distribution and retirement plans, we always prepare for the worst and hope for the best. If I have learned anything managing money for the past 15 years, it’s how to plan for the worst case scenarios.

Risk management (and planning for the worst on the front end) should be commonplace when sitting down with an advisor. I cannot speak for others, but I want all of our clients to know this: your money is invested in a manner that takes market crashes into consideration. Most of you have some form of insurance around a portion of your nest egg, protecting the income needed now or in the future.

Finally, I want to comment on the Federal Reserve and share my opinion of where I think interest rates are going in the short term. Over the past few months, there has been a lot of discussion about the Fed raising interest rates sometime between now and December. Obviously, this line of thinking was before the hemorrhaging we’ve witnessed these last few trading days. It is therefore my opinion that Fed will not be able to raise rates, wanting to avoid precipitating the bursting of the equity bubble.

I mention the above due to some questions we’ve gotten about bond funds and how they might react to rising interest rates. Let me do my best to address this. First, individual bonds typically drop in value when interest rates rise. The reason for this is the value of the bond is likely paying less interest than a similar bond that can be bought on the street. So, what about bond funds? Well, bond funds are made up of several different individual bonds managed by a portfolio manager.

Bond fund NAV (prices) can be negatively impacted by rising interest rates. This loss in share price can be mitigated by the increased dividend payments. The point being this: I do not see the Fed raising rates anytime soon. I see many investors running for the door out of equities and into the traditionally less risky bond fund market. With prices already low due to anticipation of a rate hike, we feel this is an asset class that continues to be a suitable investment for our clients.

To close, I want to remind you of 2008. Remember how scary it was for investors from October through May? Many people tried to stay invested, not wanting to sell at the low and miss the eventual recovery. Most investors who did not sell during this time, out of panic, witnessed their account values rebound more than 30% in 2009. Markets rise and markets fall, today, maybe more violently than in times past. All that being said, as long as you have planned for the worst, you can be hopeful that the best is yet to come.

Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantee against market loss or greater or more consistent returns.


Registered Representatives offer securities through Securities America, Inc. Member FINRA/SIPC. Financial Advisors offer advisory services through Securities America Advisors, Inc. The Farese Group, LLC and the Securities America companies are separate entities.


Download This Letter from Paxton Farese