Friday, August 16, 2019

Market Volatility--Gary's Thoughts in August 2019

This market volatility is unsettling.  I think it is mostly due to economic slowdown in some key foreign countries like Germany, and to the trade dispute between China and USA.  But I’m still positive because earnings growth is good in corporate America, US consumer spending is strong, unemployment is low, and US-based stocks are not “overvalued” to a concerning degree.

I also think China does not want to actually hurt itself even if it may want to try to hurt the US.  China selling too many US bonds too quickly would hurt the US, but it would also cause the Chinese portfolio of US bonds to drop in value

Further, I believe the president focuses on tangible and recognizable measures, like unemployment rate and stock market performance, and thus will want to ultimately do things that keep those #s looking strong.  My hope is after some blustering by China and the USA, they will each pull back from the verbal brinksmanship.

For most of us...  generally, long-term investors with moderate to aggressive risk tolerance should pretty much ignore the stock market volatility and stay invested in the suitable diversified strategy, even as markets go up and down

I’m happy to talk more if you wish.  I’m also sharing some links to articles that I find informative.  My firm’s social media presence includes Facebook (Potomac Wealth Strategies, Twitter (@GLPartoyan), and LinkedIn (Garo Partoyan), in case you want to follow me that way.

Thank you, and happy Friday!

--Gary Partoyan
Potomac Wealth Strategies, LLC

Portfolio Model Performance Through 2019-06-30


US and Foreign Indexes
3 mo 1 yr 2 yr 3 yr 5 yr 10 yr 2008
Stock Markets (72-21-7)
3.2% 5.4% 7.7% 6.0% 10.0% 5.8% -41.0%
S&P 500 PR
3.8% 8.2% 10.2% 11.9% 8.5% 12.3% -38.5%
Dow Jones Industrial Avg PR
2.6% 9.6% 11.6% 14.1% 9.6% 12.2% -33.8%
MSCI EAFE
2.5% -1.9% 1.0% 6.1% -0.5% 3.9% -45.1%
MSCI EM
-0.3% -1.4% 2.2% 8.1% 0.1% 3.3% -54.5%
Barclays Agg Bond--US
3.1% 7.9% 3.7% 2.3% 3.0% 3.9% 5.2%
Citi WGBI nonUSD (foreign bonds)
3.9% 4.5% 3.9% 0.8% 0.2% 1.9% 10.1%









Aggressive (95% stocks-5% bonds)
2.6% 2.6% 6.4% 9.6% 5.3% 9.7% -38.9%
95 Strategic V
3.4% 5.8% 9.7% 13.3% 8.1% 12.7% -36.1%
95 Schwab index 2019
3.9% 7.0% 9.5% 12.2% 7.9% 12.3% -36.2%
95 Strategic USA II
5.2% 12.2% 12.3% 13.4% 9.5% 14.2% 26.3%
WealthFront 9
3.0% 5.5% 7.6% 10.3% 5.4% 9.5% -38.1%
Franklin Mutual Beacon A
2.4% 6.3% 4.6% 9.7% 5.6% 10.6% -40.5%
American Funds Port Ser Growth
3.2% 4.3% 10.2% 13.1% 8.7% 12.7% -39.5%
American Funds Growth+Global
3.5% 4.2% 9.7% 13.1% 7.7%

Confluence Aggressive Growth
2.9% 1.3%
8.9% 6.4% 10.5%
Confluence Value Opportunities
9.3% -0.9%
7.2% 8.2% 14.4% -22.3%
Confluence Equity Income
5.9% 10.0%
10.3% 9.6% 14.3% -18.9%
Confluence Small Cap Value
4.1% 0.6%
13.0% 10.5% 14.1% -21.8%
Confluence Large Cap Value
7.6% 16.8%
13.0% 9.9% 14.9% -27.0%
Confluence IDEA
5.3% 12.9%
14.0% 11.2%










Moderately Aggressive (75-25)
2.5% 3.5% 5.6% 7.1% 3.9% 8.0% -31.0%
80 Strategic V
3.5% 6.8% 9.4% 12.6% 7.7% 12.1% -34.2%
80 Strategic III
4.0% 8.5% 9.2% 10.1% 7.2% 11.6% -28.6%
80 Schwab index 2019
3.7% 7.0% 8.6% 10.5% 7.1% 11.0% -30.9%
Confluence Growth
3.3% 3.8%
9.0% 7.3% 10.8%
Money 75
2.7% 4.4% 7.9% 10.2% 6.6% 11.1% -31.5%
T Rowe Price Personal Strategy Growth
3.6% 6.4% 8.8% 11.8% 7.3% 11.8% -37.6%
American Funds Port Ser Gr+Inc
2.7% 5.0% 7.6% 9.6% 6.8% 10.5% -32.7%
Vanguard Target Retirement 2040 Inv
3.5% 6.0% 8.1% 10.8% 6.7% 11.2% -34.5%









Moderate (60-40)
2.4% 4.0% 5.2% 6.1% 3.6% 7.2% -25.6%
60 Strategic V
3.2% 6.5% 8.3% 10.8% 6.7% 10.6% -29.1%
60 Strategic III
3.8% 8.0% 8.1% 8.7% 6.3% 10.4% -24.8%
Janus Henderson Balanced T
3.9% 10.0% 11.3% 12.1% 7.8% 10.0% -15.2%
American Funds Port Ser Moderate Gr+Inc
3.0% 6.4% 7.2% 8.4% 5.9%

American Funds American Balanced F-1
2.8% 6.9% 8.0% 8.8% 7.3% 11.0% -25.7%









Moderately Conservative (40-60)
2.6% 4.7% 4.7% 5.1% 3.1% 5.7% -17.4%
40 Strategic V
3.0% 6.3% 6.3% 7.8% 4.9% 8.4% -22.0%
40 Schwab index 2019
3.1% 6.8% 6.6% 7.0% 5.5% 8./29% -20.1%
Confluence Income & Growth
3.8% 10.2%
6.5% 6.3% 9.2%
T Rowe Price Personal Strategy Income
3.0% 6.5% 6.2% 7.4% 5.1% 8.1% -20.4%









Conservative (20-80)
2.4% 5.0% 4.0% 3.6% 2.3% 4.1% -8.4%
20 Strategic V
2.8% 6.3% 5.3% 6.0% 3.9% 6.9% -15.4%
20 Schwab index 2019
2.6% 6.4% 5.0% 4.6% 4.2% 6.2% -9.8%
Fidelity Advisor Asset Mgr 20%
2.1% 4.6% 3.7% 3.9% 3.0% 5.0% -14.4%


















NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.









NOTE 2:  "Flex", "Strategic", and "Index" models are crafted/run by Potomac Wealth Strategies.  They show history of better returns, lower volatility, or both--or, with the Index models, closer tracking--vs benchmarks and competitors.









NOTE 3:  "XX Schwab index" and "XX Schwab ETF" models are relatively low-cost and tax-efficient portfolios.  They are comprised mostly of index funds or exchange-trade funds available free of transaction charges to my clients at Schwab.  This is what many might recommend due to low-costs and portfolio efficiency.









NOTE 4:  Nothing on this blog post is specific investment advice to any individual or organization.  If the information hereon is of interest to you, please send e-mail to Info@PotomacWealthStrategies.com for a consultation.

Monday, July 1, 2019

Tax Withholding--advice from trusted tax pro

Here is important tax advice from Tung Tu, a CPA I trust:

"[Many taxpayers unexpectedly owed, or had significantly reduced refunds compared to previous years] because the 2018 Tax Cuts and Jobs Act made major changes to the tax laws, which in many cases resulted in lower tax withholding from [their] paychecks.

To avoid owing a large tax amount, it is highly recommend that everyone:
1.  Perform a paycheck checkup using the Withholding Calculator on IRS.gov; and 
2.  Submit a new W-4 form to your employer.
The calculator will help determine the right amount of withholding and can help prevent having too little (or too much) tax withheld.

Tax law changes affecting withholding include:
  • Reduced tax rates;
  • Elimination of personal exemptions;
  • Increased standard deductions: $12,000 for singles, $18,000 for heads of households and $24,000 for married couples filing jointly;
  • Increased child tax credit: $2,000 per child and a new $500 credit for other dependents; and
  • Changes to itemized deductions.
paycheck checkup is especially important if you:
  • Are a two-income family
  • Have two or more jobs at the same time or who only work part of the year
  • Claim credits like the child tax credit
  • Have dependents age 17 or older
  • Itemized deductions in 2018
  • Have high income or a complex tax return
  • Have a large tax refund or tax bill for 2018
We hope this information helps you to have the appropriate tax withholding, and avoid owing large tax amount.
Tung"

Tung T. Tu, CPA, LLC
7297 Lee Highway Ste D2
Falls Church, VA 22042
Phone: 703-636-5588; E-fax: 866-395-2378

www.tungtucpa.com

Thursday, June 27, 2019

The Business Cylce--getting a sense of the economy's direction

Here is a quick read on the business cycle, from my friends at Confluence Investment Management.

Friday, May 24, 2019

Marriage and Money--article from The 10th Man, by Jared Dillian


The 10th Man

Marriage and Money

May 2, 2019
People fight about money all the time. It has been quantified. A third or more of all arguments in marriages are about money.
Usually this falls into one of two categories:
  • Spouse A thinks that Spouse B spends too much money.
  • Spouse A thinks that Spouse B doesn’t spend enough money (i.e., is a CF)

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We talked about this in a previous edition of The 10th Man, where I advocated for married couples to keep their money separate. My wife and I have always kept our money separate, for 21+ years. Our system works great for us. Some people agreed with that, and lots of people didn’t, mostly on religious grounds: a couple bonded in marriage should work together, etc.
This essay isn’t strictly a personal finance essay—it’s actually a relationship essay about how to work together towards a common goal, because you’re on the same team. It can be hard to remember that sometimes, when the relationship turns adversarial. The irony is that people tend to work better as a team when they are two individuals, not Siamese twins.
-
Bill White

Will the world drown in debt?

-

The 0.1% Rule

I was reading some personal finance blogs recently and I came across something called the 0.1% Rule. The idea is that neither partner should have to get permission from the other partner for any expense under 0.1% of their combined net worth. So if the couple has a $100,000 net worth, you don’t need permission for a $100 expense. If you had a $1,000,000 net worth, you wouldn’t need permission for a $1,000 expense. And so on.
The theory is that if you rack up enough large expenses it will eat into your retirement savings over time, so you should first check it out with your spouse.
I have another description for the 0.1% Rule: common sense. For example, I recently bought $6,000 worth of DJ equipment. Even though we keep our money separate, I told my wife about it first, as a courtesy. She was cool with it. It’s kind of a big expense, and it would have been weird if I kept that a secret from her. It wouldn’t have been a secret for very long, anyway, when all the boxes got delivered to the front door.
Even if you keep your money separate, don’t go out and buy a new car on a whim. That’s not good for the marriage. Again, it’s common sense. You’d want to keep your spouse in the loop on a big expense like you’d want to keep him/her in the loop about anything else.
I also don’t much like the idea of getting “permission” from the spouse to make a purchase. That bothers the hell out of me. My wife doesn’t own me, and I don’t own my wife. My wife doesn’t need my permission to go out and have drinks with the girls. I don’t need permission to fly to Vegas with my brother. As a courtesy, we’ll keep each other in the loop—but that is the extent of it.
Apparently, there is a new term in the lexicon for not keeping your spouse in the loop. It is called “financial infidelity.” This is when one partner goes out and makes a big purchase or takes out a loan, or opens a separate account without the knowledge of the spouse. It is dishonest behavior.
Dishonesty about money can be just as damaging as dishonesty in sexual relations. And it’s easier than ever to do, because there are no longer any paper statements being delivered to the house.
If you are at the point in your relationship where you are sneaking around to buy stuff, this isn’t a money problem. It’s a relationship problem, and it’s bad.
And it’s a two-way street—yes, the person sneaking around is at fault, but so is the person who has created an environment where the other person feels like they have to sneak around. As usual, it comes down to open and honest communication. When that disappears, people hold each other in contempt.
It helps to marry someone who has the same attitudes towards money, but it’s not necessary. In my marriage, I’m the risk-taker who spends a bit and my wife is the cautious saver. We make it work because we communicate. Sometimes I get my way, but not always. Sometimes she gets her way, but not always. If one person got their way all the time, it would no longer be fair. We’re a team. If it’s not fair, then there’s no team.

Life Is Short

Life is too short to fight about money. Especially inconsequential amounts of money. If you are getting (or receiving) crap for making small purchases, it’s perhaps time to take a step back and evaluate the relationship. For two reasons:
  1. Your standard of living in retirement is not the product of millions of small decisions, it’s the product of one or two big decisions.
  1. You shouldn’t sweat the small stuff. Almost everything is small stuff.
The funny thing is that people will go to the mat on $20 purchases, but when it’s time to take out a high six-figure mortgage, groupthink takes over and the married couple walks into a giant spinning blade.

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If you’re going to argue about something, argue about the thing that could blow you sky-high, not the bottle of wine you picked up from the grocery store. I watched a lot of people tomahawk themselves financially in 2006 and it was usually because one partner fell in love with the “dream home” and the other partner just couldn’t say no. Most people can resolve most disagreements with sincere communication—unless one partner has severe pathological spending (or lack of spending) issues, issues that are deep-seated and hard-wired from childhood trauma.
Those people are unlikely to change unless their behavior causes them a great deal of discomfort. If you are married to a person like this, and you love them, make do the best you can. These are not easy issues to deal with.
Figure out a system that works. Do more of what works and less of what doesn’t—not the other way around.
Jared Dillian
Jared Dillian

Get Thought-Provoking Contrarian
Insights from Jared Dillian

Thursday, January 3, 2019

Portfolio Model Returns Through 2018-12-31

2018 ended in the red.  There was a sharp downswing in the final quarter, leaving major stock indexes negative for the year.  The US bond index was exactly flat, and the foreign bond index was down about -2%.

Our diversified portfolio models, however, held their own against or outperformed their benchmarks.  Diversifying according to a prudent asset allocation model once again proved effective.

For example, an aggressive investor in the 95 Strategic IV model was down about -7.5% (after my firm's advisory fees and the mutual funds' internal expenses), while the benchmark was down -9.8%.  That same portfolio model would have outperformed the Dow Jones Industrial Average by about 1% per year over the 10-year period, too.

Here is how various portfolio models and benchmarks and indexes fared in 2018 (3mo, year 2008, and 1yr data are actual % moves.  2yr through 10yr data are average annual returns).


US and Foreign Indexes
3 mo 1 yr 2 yr 3 yr 5 yr 10 yr 2008
Stock Markets (72-21-7)
-13.3% -9.1% 4.9% 5.6% 4.1% 8.9% -41.0%
S&P 500 PR
-14.0% -6.2% 5.8% 7.0% 6.3% 10.8% -38.5%
Dow Jones Industrial Avg PR
-11.8% -5.6% 8.7% 10.2% 7.1% 10.3% -33.8%
MSCI EAFE
-12.9% -16.1% 1.1% 0.1% -2.1% 3.4% -45.1%
MSCI EM
-7.9% -16.6% 5.8% 6.7% -0.8% 5.5% -54.5%
Barclays Agg Bond--US
1.6% 0.0% 1.8% 2.1% 2.5% 3.5% 5.2%
Citi WGBI nonUSD (foreign bonds)
1.3% -1.8% 4.1% 3.3% 0.3% 1.3% 10.1%









Aggressive (95% stocks-5% bonds)
-13.6% -9.8% 3.6% 5.6% 3.5% 8.9% -38.9%
95 Strategic USA II
-9.5% -2.4% 7.3% 9.1% 7.2% 13.9% -26.3%
95 Strategic IV
-10.5% -6.4% 7.6% 8.2% 5.7% 12.3% -33.5%
95 Schwab index 2018
-14.4% -8.2% 5.7% 7.1% 5.4% 11.1% -37.9%
95 Schwab ETF 2018
-12.8% -7.9% 6.3% 8.0% 5.7%

Confluence Value Opportunities






-22.3%
Confluence Equity Income






-18.9%
WealthFront 9
-11.1% -9.1% 5.5% 6.8% 3.7% 9.0% -38.1%
American Funds Growth+Global
-14.2% -8.0% 7.9% 7.2% 5.4%










Moderately Aggressive (75-25)
-10.4% -7.5% 2.3% 4.1% 2.6% 7.3% -31.0%
80 Strategic IV
-8.4% -5.5% 6.5% 7.2% 5.0% 11.0% -29.2%
80 Schwab index 2017
-10.8% -5.5% 4.8% 5.8% 4.5% 9.1% -29.1%
80 Schwab ETF 2018
-9.7% -6.0% 5.5% 6.7% 4.9%

Money 75
-10.7% -5.6% 4.5% 7.0% 5.3% 10.8% -31.6%
American Funds Port Ser Gr+Inc
-9.7% -6.0% 5.7% 6.7% 5.5% 9.8% -32.7%









Moderate (60-40)
-8.3% -5.9% 2.1% 3.8% 2.5% 6.6% -25.6%
60 Strategic IV
-6.8% -4.6% 5.4% 6.3% 4.4% 9.9% -24.7%
60 Schwab index 2017
-8.6% -4.2% 4.1% 4.9% 3.9% 7.8% -23.8%
60 Schwab ETF 2018
-7.4% -4.8% 4.9% 5.8% 4.6%

American Funds Port Ser Moderate Gr+Inc
-7.0% -4.6% 5.2% 5.7% 4.6%










Moderately Conservative (40-60)
-5.6% -3.8% 2.2% 3.3% 2.1% 5.3% -17.4%
40 Strategic IV
-4.7% -3.5% 4.0% 4.9% 3.5% 8.1% -18.2%
40 Schwab Index 2018
-5.5% -3.6% 2.9% 3.1% 2.4% 5.9% -17.6%
40 Schwab ETF 2018
-4.9% -3.2% 4.6% 4.9% 4.3%

Hartford Balanced Income A
-4.8% -5.1% 2.9% 5.6% 4.8% 9.0% -18.5%









Conservative (20-80)
-2.5% -1.5% 2.0% 2.7% 1.7% 4.0% -8.4%
20 Strategic III
-2.2% -1.9% 1.8% 3.3% 2.6% 5.3% -9.0%
20 Strategic V
-1.3% -0.7% 3.8% 4.2% 3.5% 7.0% -9.6%
20 Schwab index 2017
-2.7% -0.6% 2.7% 2.5% 2.3% 4.3% -9.2%
20 Schwab ETF 2018
-1.3% -1.2% 2.9% 3.1% 2.9%



















NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.









NOTE 2:  "Flex", "Strategic", and "Index" models are crafted/run by Potomac Wealth Strategies.  They show history of better returns, lower volatility, or both--or, with the Index models, closer tracking--vs benchmarks and competitors.









NOTE 3:  "XX Schwab index" and "XX Schwab ETF" models are relatively low-cost and tax-efficient portfolios.  They are comprised mostly of index funds or exchange-traded funds available free of transaction charges to my clients at Schwab.  This is what many might recommend due to low-costs and portfolio efficiency.









NOTE 4:  Nothing on this blog post is specific investment advice to any individual or organization.  If the information hereon is of interest to you, please send e-mail to Info@PotomacWealthStrategies.com for a consultation.

Monday, November 19, 2018

Perspective on Portfolio Performance, Market Performance


It has been a frustrating year for investors, as the markets have been up and down a lot and many of us are at about breakeven so far.  But my clients have been doing well compared to the benchmarks, and that is a high-priority goal I have for long-term investors.

For perspective, here are some Year-To-Date returns (through Friday) for comparison:

S&P500 (USA stock mkt)                                         +2.34%
PWS' 75-25 moderately-aggressive benchmark        -1.73%
Vanguard Target Retirement 2035 mutual fund         -1.74%
MSCI EAFE index (large foreign companies)           -9.36%
Barclays Aggregate Bond index (USA bond mkt)     -1.95%

The S&P500 is the biggest portion of the moderate through aggressive portfolios, but since it represents just the largest USA-based stocks, those portfolios have a lot of other components (small companies, foreign stocks, cash, bonds, commodities).

If you have any questions or concerns about what benchmark is right for you, or how your portfolio is doing compared to the benchmark, please let me know and we will discuss it and make sure you are invested the right way for you risk tolerance and investment goals.

Thank you.

--Gary Partoyan
Potomac Wealth Strategies, LLC
2018-11-17