Wealth Management

As anyone would have expected, the extraordinary convergence of extreme stock market volatility, low interest rates, declining home values, diminished retirement savings accounts, and chronic economic sluggishness has taken a severe toll on the American psyche. For many investors, it may have forever altered the way in which risk is perceived and managed.

If you have read any literature on retirement planning or have received advice from a financial professional, chances are you were presented with the 70% rule, the one that suggests that retirees will need between 70 and 80% of their pre-retirement income in order to maintain their standard of living.

After costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar for any time period.
—William F. Sharpe, 1990 Nobel Laureate

The saving versus paying off debt is an age-old quandary that has plagued people since the advent of consumer debt. Pose this question to a group of financial planners and the responses will be split, roughly down the middle. While there might be as many advocates for savings as there would be for paying down debt, the broad consensus will likely be that it really depends on the situation.

The gap between the 20-year S&P 500 return and the average equity fund investor return expanded in 2013. This was the first gap expansion since 2010 and only the 3rd in 10 years. The S&P 500 return increased from 8.21% to 9.22% in 2013 while the average equity fund investor return increased from 4.25% to only 5.02%. This resulted in the gap widening from -3.96% to -4.20%.