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2020 Year End Commentary

A Taoist story tells of an old man who accidentally fell into the river rapids leading to a high and dangerous waterfall. Onlookers feared for his life. Miraculously, he came out alive and unharmed downstream at the bottom of the falls. People asked him how he managed to survive.

“I accommodated myself to the water, not the water to me. Without thinking, I allowed myself to be shaped by it. Plunging into the swirl, I came out with the swirl. This is how I survived.”(1)

Think back to March when the government shutdowns were starting. Think about the forecasts and predictions being made. By late March, the S&P 500 had sold off over 30% of its value from its high in the middle of February, and small caps had sold off even more.(2) Looking back on the markets and the dreary expectations, would you have expected global markets to post double-digit returns for the year? Would you have guessed that emerging market stocks would perform in line with the S&P 500 for the year, with both markets up over 18%?(3) What about small caps? Would you have expected U.S. small cap stocks to return 20% for the year when there was so much uncertainty around whether many of these companies could survive the pandemic?(4)

The changing landscape from COVID benefited companies like Amazon and Zoom, so their growth during the year made sense, but would you have expected Tesla to post such extraordinary gains? The stock closed 2019 at less than $84 per share, but by the end of 2020, it was trading over $700 per share.(5) Tesla was added to the S&P 500 in December with a total market value of over $600 billion, making it the largest stock ever added to the index.(6) Looking back, we would like to believe we saw it coming (or at least that the signs were there), but if we are honest – doubling down on Tesla in January 2020 looked like a bet against the ‘smart money.’ At the end of 2019, roughly one out of every five shares of Tesla were betting on the stock price falling, not going up!(7) 

When we look at 2020, we are reminded that whether we are talking about industries or individual stocks, predicting the market is extremely difficult. Some people get lucky, but the skill to have repeat performance is rare. A recent study performed by S&P Dow Jones found that the top performing funds from June 2010 through June 2015 were more likely to liquidate or change their investment style than to continue to outperform over the next five years.(8) And that is the smart money – these are funds managed by professionals that invest millions in trying to be the best and have the edge.

We call this the loser’s game, and we choose not to play it – you have worked too hard to accumulate your wealth. Instead, we have designed your portfolio to flow with the markets, not to time or try to predict the markets. We invest across hundreds of stocks, dozens of countries and all sectors. In 2020, amidst the uncertainty, we rebalanced your portfolio to take advantage of lower prices and tax loss harvested to offset capital gains in other areas of your portfolio – we focused on what we could control. We continue to balance the stock risk in your portfolio with high quality fixed income to dampen changes in your total portfolio value. We stick with the strategy that we decided upon before the emotions took over. In other words, we plunge with the swirl, and we come out with the swirl – this is how we help you progress towards a successful retirement.

When you have questions about your investments, need to inform us of family or work-related changes, or want to discuss your progress towards your financial goals, reach out. We are ready to help.

-Squire Wealth Advisors

References:

Taken directly from: http://truecenterpublishing.com/zenstory/goflow.html; Cross reference: https://taoist-arts.com/News_-_Views/Chinese_Philosophy_/Zen_and_Taoist_Stories/zen_and_taoist_stories.html
From Morningstar Direct. From 2/20/2020 (the market peak) to 3/22/2020 (market bottom), the S&P 500 Index lost 31.8 percent and the Russell 2000 Index lost 40 percent.
From Morningstar Direct. From 1/1/2020-12/31/2020, global markets, as measured by the MSCI ACWI IMI index, returned 16.3 percent (with net dividends reinvested). The S&P 500 Index returned 18.4 percent compared to 18.4 percent for the MSCI Emerging Markets Investible Market Index (with net dividends reinvested).
From Morningstar Direct. From 1/1/2020-12/31/2020, the Russell 2000 Index returned 20 percent.
Source: finance.yahoo.com, historical prices.
Source: https://www.advisorperspectives.com/commentaries/2020/12/17/tesla-the-largest-cap-stock-ever-to-enter-s-p-500-a-buy-signal-or-a-bubble, retrieved January 4, 2021
Technically, this is called ‘short interest,’ and it is a measure of the percentage of outstanding shares that are sold short in the market. In December 2019, the short interest in Tesla ranged from a high of 20.1 percent at the beginning of the month to 18.3 percent at the end of the month, meaning that roughly one of every five shares were sold short. Source: Morningstar Direct.
Of the top 50 percent of performing funds from June 2010 to June 2015, 38.6 percent remained in the top half over the next 5-year period, 13.4 percent were merged or liquidated, and 28.1 percent changed their style. Source: U.S. Persistence Scorecard Mid-Year 2020, published December 8, 2020, retrieved January 4, 2021https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard.
Important Disclosure: Information presented herein is for educational purposes only and should not be construed as specific investment, accounting, legal or tax advice.  Certain information may be based on third party data which may become outdated or otherwise superseded without notice.  Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed.  Performance is historical and does not guarantee future results. Indices are not available for direct investment.  Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Total return includes reinvestment of dividends and capital gains.  By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party websites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.
The contents of client letter is for informational and educational purposes only. The information presented is not to be construed as investment, tax, financial, accounting or legal advice. Individuals should make their own evaluation and consult with a professional based on their individual circumstances. The information contained within this presentation is based upon data and information available at the time and may become outdated or change without notice. IRN-21-1695

9 Simple Money Moves to Make Before 2019 Ends

The calendar has reached the final month of the year, giving you just days to make some year-end financial moves. These strategies can help lower the risk of identity theft and give you a better picture of your financial health.

None of them should take long — you can probably knock them out during the commercial breaks of your favorite TV shows.

1. Change passwords

Update all passwords for next year, especially those for bank, credit card and other sensitive accounts.

You could use a notebook and pen to record your new passwords, but a much better idea is a password manager. Most will generate and store strong passwords for you. Then, you only have to remember one.

We explain password managers in detail and offer a free option and a paid option in “The Best Way to Remember and Protect All Your Passwords.”

It’s not the usual blah, blah, blah. Click here to sign up for our free newsletter.

2. Request a free credit report

Federal law entitles you to one free credit report every year from each of the three major credit-reporting agencies. Download one during a commercial break, and review it for mistakes or suspicious activity.

Make sure you request reports via AnnualCreditReport.com, the official website for free credit reports. Other websites might send you reports, but there’s usually a catch.

For example, the site might automatically enroll you in a credit-monitoring service or some other subscription program. While you’re at it, check out our Solutions Center for help with credit card debt.

Related: A Veteran Thrift Store Shopper Shares His 8 Best Secrets

3. Review your FSA balance

A rule enacted a few years ago permits employers to let flexible spending account participants roll over up to $500 into the next year.

Note, however, that employers aren’t required to offer a grace period or a rollover. So, now’s the time to find out your employer’s policy.

If the employer does not participate in either option, use the few minutes of a TV commercial break to go shopping. Spend that money on qualified expenses by doing things like refilling prescriptions or maybe buying new glasses.

4. Complete an investment review

Does an investment review sound time-consuming? It’s not, really. You can do one in 15 minutes or less with these steps. In a nutshell, you want to check your investment performance, review your fees and reallocate balances if needed.

While examining and understanding your investments might seem boring, it’s exciting compared with the commercials you’ll be missing.

5. Sell losses to offset gains

Look for losers among your investments and consider unloading them. Selling a stock or other security at a loss can offset investment gains you’ve taken during the year, thus lowering your tax bill.

There are a couple of caveats. For starters, losses in tax-advantaged retirement accounts — like an IRA or 401(k) — aren’t deductible.

You also cannot game the system by selling a stock at a loss, then buying it back a few minutes or days later. For an investment loss to be deductible, you can’t purchase a substantially identical security within 30 days before or after a sale.

6. Scan and shred paperwork

Have a teen in the house? Let him or her scan the mess of paperwork you’ve been hoarding all year onto the computer and then shred the originals. If that doesn’t sound like fun to your kid, you can always pay him or her a few bucks.

For those of you who are childless, never fear. This is a rather mindless year-end task that can be easily accomplished during your annual viewing of “It’s a Wonderful Life.”

7. Make a will

This may not seem like a quick-and-easy money move, but if you have a simple estate, there’s no reason to make things complicated. Search online for “will template” and your home state, and you’ll find all sorts of fill-in-the-blank wills that can be downloaded free. If you don’t have a will, these will do for now.

If that doesn’t sound like an adequate long-term solution, have your will reviewed by an estate attorney later. But even a cheap internet will that you prepare during a commercial break is better than none.

8. Create a budget

Creating a budget is easy today. All you need is the use of a free service such as that offered by our partner You Need a Budget (YNAB).

When you use a site or app like Mint or You Need a Budget, you give it your bank account information and create expense categories. Then, your goals and spending are automatically tracked and updated. You can get started during a commercial break.

If you want to stick to the old-fashioned method of budgeting with paper and pencil, no worries. Just check out our free budgeting spreadsheets.

9. Update beneficiaries

The end of the year is a good time to review your designated beneficiaries and update them as needed. Did you get married? Divorced? Have kids? Have a falling out?

Make sure you have the right people listed as your beneficiaries on accounts such as:

  • Life insurance
  • Annuities
  • Bank accounts
  • Retirement accounts, including IRAs and 401(k)s

https://www.msn.com/en-us/money/personalfinance/9-simple-money-moves-to-make-before-2019-ends/ar-BBR7g6h?li=BBnbfcN