Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

 

Print
PDF

Dealing with Investor Anxiety: Think Long-Term

Written by Les Detterbeck.

Keep Calm and Think Long-Term

Stock prices reflect a mix of emotions, biases and rational calculations. The bond market reflects the economy. Historically, bond markets had done a better job in predicting recessions.

The two big bond stories last week were 1) the “inverted yield curve”- when interest rates on short-term bonds are higher than long-term bonds, and 2) yields below 2% on 30 year treasuries- indicating investors expect low inflation and a weaker economy for a long time.

We all remember the 2017 income tax cut that boosted the economy and produced stock markets returns of 20% or more in 2017. These tax cuts were supposed to lay a foundation for many years of high economic growth. Since mid-2018, however, the economic data has been confirming what many of us expected. The tax cuts provided a short sugar “high,” which is now over. Instead, we have trillion dollar deficits and lack of large promised business investments, including infrastructure, which never materialized. The economy has reverted to its pre-stimulus growth rate of near 2%.

This shouldn’t surprise us. No major economy is growing as fast as it was before 2008. In almost every country, the national discussion focuses on what must be done to revive growth and ignores the fact that the slowdown is happening everywhere. The working population is declining in 46 countries around the world, including Japan, Russia and China. Demographics are a key driver of economic growth. So, we can expect to see recessions (two quarters of negative growth) more likely in the future as working populations contract. BTW- the U.S. population is growing at less than 1% per year.

Over the next few decades, we will likely see more growth decline. Ruchir Sharma, author of “The Rise and Fall of Nations,” suggests that new benchmarks for economic success should be 5% growth for emerging countries, 3-4% growth for middle income countries like China, and 1-2% growth for developed countries like the U.S. and Germany.

Yes, there are uncertainties in the market, including US-China trade tensions, a weakening European economy, and concern about a recession. These produce a huge dilemma for U.S. business owners, trying to make plans for the future. So, there are lots of piles of cash, waiting for clarity. We may or may not soon have a recession. Yet all of this uncertainty produces increased volatility and anxiety. And studies show that a 3% down day, like last Wednesday, feels about ten times worse than a 1% down day. What’s an investor to do to reduce anxiety?

We understand it is difficult to think long-term, but we highly recommend it:

1) Recognize that equities will likely produce lower nominal returns in the future. However, with inflation also likely lower, the real returns of equities will likely outpace fixed income and alternatives. Equities will continue to provide the primary engine of growth.

2) Use all three asset classes. A diversified portfolio composed on equities, fixed income and alternatives has been shown to reduce risk and increase return.

3) Review your long-term financial plan and determine what rate of return you need to meet your financial goals. The expected return of your asset allocation must be sufficient to meet your goals or you need to revise your goals and plan.

4) Review your risk profile to determine your appropriate asset allocation. Using the assumption that equities could drop 40% and you can’t tolerate a loss of 10% or more in your portfolio, then your allocation to equities should not exceed 25%. Of course, this allocation would severely limit your upside.

5) Stay invested. Don’t try to time the market. A recent report from Morningstar shows that “low cost funds", (like those used at DWM), "lead to higher total returns and higher investor returns.” First, for efficient markets, the active managers in the high-cost funds overall produce gross results equal to the benchmarks, but then the additional costs of 1% or more is subtracted. Second, studies show that active managers attempting to time the market have failed and this subtracts another ½% per year from performance. Even highly-paid active managers can’t time the market successfully.

Lastly, in this time of overall investor anxiety, fee-only total wealth managers, like DWM, are here to rescue you. Yes, we execute a detailed process to add value every day in the areas of investing, financial planning, income taxes, insurance and estate planning. Yet, one of our most important tasks we have is to protect our clients from hurting themselves in the capital markets. Investors overall have a very human tendency to do exactly the wrong thing at the worst possible moment.

We understand it’s hard to think long-term. Today’s world moves at a very fast pace. And, the news is often designed to instill fear. Don’t succumb to emotions. Reduce your anxiety. Allowing your portfolio to compound quietly over time can be boring, yet very successful.   If your allocation or the markets are making you anxious, let’s talk.

 

https://www.dwmgmt.com

Print
PDF

Equifax's Big Payback: Should you File a Claim?

Written by Jake Rickord.

Equifax Credit File 

It was just two short years ago when Equifax went public with the realization that access to about 150 million users had been obtained by a third party still unknown to top security officials. Without knowing the perpetrators, motive behind this breach has yet to be concluded, generating worries about criminals using the identities stolen to cash in through the sale of said data or something more nefarious, including spy scandals.

While advanced cyber security and dark web professionals sift through to try and find the data, Equifax has been trying (and being forced to) make up for their mistake with the millions of Americans whose information was violated. On July 22nd, 2019, the Federal Trade Commission, in conjunction with several other agencies and all 50 states, agreed in court to a settlement of roughly $700MM to be paid out in reparations to those affected by the breach in accordance with allegations that the company did not provide and monitor security measures to protect against this attack. This is on record as the largest settlement ever dished out for a data breach in U. S. history.

Of that $700 million dollars, at least $300 million is to be used to offer the plaintiffs access to years of free credit monitoring service in order to ensure that any data stolen from Equifax during the breach was not used to steal individual’s identities, and also allows for free credit freezes as well for those who are more concerned. The other payout option they provided was $125 for anyone who files a claim for it. An extremely small payout on an individual level considering the fortunes that could be lost if a person’s identity was indeed stolen, but still a payment nonetheless. Should you file for one of these checks?

Well, unfortunately, Equifax has turned around and in the blink of an eye, stating that the amount of people filing for this $125 payment has surpassed the allocated funds for paybacks. According to the FTC, “because of high interest in the alternative cash payment under the settlement, consumers who choose this option might end up getting far less than $125”. Beyond the fact that this amount may be smaller in scope than originally planned on, the filing process isn’t as easy as filling out a form. Instead, those who file are required to gather documents related to the hack that show losses, and provide ancillary information and documents in the process of filing your claim. Many of those who have started the process are turned off by the fact that they need to proceed in presenting further information to the company that they already don’t trust to keep their information safe, and several scammers have set up websites to further deceive you into entering personal information. However, regardless of all these issues, millions have, and are continuing to file their claims which will remain open until January 22, 2020.

While the $125 (or likely much less) payment option may not be the best call, the alternative option for free credit reporting, monitoring, and freezing is catching on with some of those affected. Included in this package is free credit reporting, most importantly from all three major credit bureaus, which in theory is worth “hundreds of dollars a year” according to Robert Schoshinski, the assistant director for the FTC’s Division of Privacy and Identity Protection. To add to this value, included in the credit reporting is up to $1 million dollars in identity theft insurance and individualized identity restoration services. All in all, this secondary option may not be the source of direct money in your pocket, but rather can save you huge amounts of money in the case that something malicious were to occur as a result of this breach.

Here at DWM, we are always monitoring ways we can protect our clients, and we will continue to do so. While Equifax may not be giving out the $125 check anymore, free credit monitoring might be a very nice way to go if you’re willing to go through the process of filing a claim. This can essentially mean spending five to ten minutes of your time for 10 years’ worth of peace of mind, and roughly $2,400 worth of value ($20 per month of monitoring for 10 years). While it may seem like pocket change in comparison to the value of the data stolen from you, this can definitely serve as great protection in the case that any of this information is fraudulently used in the future.

 

If you would like to file a claim, please visit Equifax's claim website: https://www.equifaxbreachsettlement.com/file-a-claim 

 

https://www.dwmgmt.com

Print
PDF

Did You Ever Dream That You Forgot Your Pants? No Problem.

Written by Lester Detterbeck.

 

dream_not_wearing_pants.jpg

Have you ever dreamed that you are walking into a college final exam and you have done no studying for it?   Better yet, in the dream, have you walked into the exam and forgotten your pants? I can tell you from personal experience, I have had dreams where both events occur. Fortunately, I’m pleased to report, this has never happened in real life and likely and hopefully never will. More importantly, though, I now know that my dreams have served an all-important psychological function-working out my anxieties in a low-risk environment and preparing for the future.

Most of the emotions we feel in dreams are negative; including fear, helplessness, anxiety and guilt. Yet, this night-time unpleasantness may, in fact, provide an advantage during the day.

All sleep is not the same. Dreams typically occur in REM (rapid eye movement) sleep, when our brains are more active. You cycle between REM and non-REM sleep. First, comes non-REM sleep followed by REM sleep and then the cycle starts over again. Babies spend 50% of their sleep in the REM stage, compared to only 20% for adults. Deep sleep which is non-REM is known for the changes in your body, not your brain; when your body repairs and regrows tissues, builds bone and muscle and strengthens the immune system.

REM sleep is crucial for mental and physical health, yet we generally slough off the dreams as being silly, juvenile, and self-indulgent and simply get on with our day. Because dreams seldom make literal sense, it can be easier to discard them than to try to interpret them. In fact, according to Alice Robb, author of “Why We Dream,” dreams can help us “consolidate new memories and prune extraneous pieces of information.” Further, they may provide a time for the brain to experiment with a wider array of associations of the facts and outcomes and sometimes help solve problems.

Finnish evolutionary psychologist Dr. Antti Revonsuo studied the perplexing question of why our minds subject us to something so unpleasant. He reasoned that if our ancestors could practice dealing with dangerous situations, perhaps battling a mastodon, as they slept, they might have an advantage when they had to confront them in the next day. Research on animals fits into this theory. REM deprived rats struggle with survival-related tasks such as navigating a maze, while rats with REM sleep apparently dream about this upcoming challenge and perform better.

In 2014 researchers at the Sorbonne interviewed a group of aspiring doctors about to take their medical school entrance exam. Nearly all of the 719 students who replied had dreamt about the exam at least once beforehand and, understandably, almost all of those dreams were nightmares. They had dreamed that they got lost on the way to the exam facility, that they couldn’t understand the questions and that they had written their answers with invisible ink. Ouch. But, when the researchers compared the results of the exam with dreaming patterns, they found that students who dreamed more often performed better in real life.

Ms. Robb suggests that, while we tend to focus on and discuss dreams that are strange, most dreams are less bizarre than we think. A study in the 60s by psychologist Frederick Snyder of 600 dream reports showed that “dreaming consciousness” was, in fact, “a remarkably faithful replica of waking life.” He found that 9 out of 10 dreams “would have been considered credible descriptions of everyday experience.”

In another study, Dr. Revonsuo and Dr. Christina Salmivalli, analyzed hundreds of dreams from a group of their students and discovered that the emotions in the dream were usually appropriate to the situation, even if the situation itself was unusual. “The dreamer’s own self was ‘well preserved.’” Effectively, even in dreams, we know who we are.

So, go ahead and get a good night’s sleep tonight and look forward to the REM dreaming phase. It may feel negative and not be all that comfortable. However, it just might give your brain some time to work through some important matters and find solutions.

https://www.dwmgmt.com

Let's Get Acquainted

We offer a complimentary "Get Acquainted" meeting to describe our services, and to see if our services are right for you.

Contact Us