September 2020 Client Letter

September Client Letter

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June 2020 Client Letter: Investment Math

June 2020 Client Letter: Investment Math

Investment math can be complex. If a stock dropped 10% this quarter and gained 10% the next, you might think you have recovered the loss. Unfortunately, you are still down 1%. To recover the loss, the stock has to increase 11%.

The bigger the decrease, the more it takes to recover. A 20% loss means you need to earn 25% to break even. If you lose 35%, you’ll need to make 54% to erase the red ink. A 57% drop like we saw during the great recession requires a whopping 132% increase to completely recover.

Investment math isn’t addition and subtraction. It’s multiplication.

Investment Math

The 2020 Bear Market

From February 19 to March 23, the stock market dropped 34%. In the 99 days that followed, it gained over 38.6%! It didn’t erase all the losses, but it was a strong start.

Investment Math

Download Now: Investment Math

Download a pdf copy of our June Newsletter.  In this issue we cover:

  • Investment Math
  • Some RMD Relief
  • An above the line tax deduction for charitable contributions.

Panic Selling

In mid-June, Fidelity made a shocking announcement. Earlier this year, one-third of all their account holders, age 65 and older, sold all their stock positions. Nearly one out of every six account holders—regardless of age—sold all their stock positions.

It is possible a few sold before the market crashed. But remember, we went from an all-time high to 34% lower in 33 days. More than likely, most of those sales happened after the damage began.

Sitting on the sidelines means the investors who sold missed the incredible gains. They wanted to limit further damage, but doing so limited their ability to recover. Remember the investment math. If your account drops 20%, you need to earn 25% to break even. Those who sold their stocks will have trouble doing that in a money market fund or CD.

Bear markets are extremely unpleasant. But when they happen, one of the worst things you can do is move to the sidelines. Bottoms happen without notice. Often times the first few months after produce incredible gains. Missing those gains makes recovering the losses difficult at best.

Investment math

What's Next

Uncertainty remains a common theme. The coronavirus is still a part of the story, and it looks like it will be for the foreseeable future. An ugly and intense election season will start soon. Being a patient and disciplined investor is an ongoing challenge.

Over the long term, we remain optimistic. We believe the great businesses will continue to not just survive, but thrive. But in the short term, anything is possible. The next several months could be a very bumpy ride.

Ask A CFP Pro

Judging by the data, our ask a CFP pro show has been very popular.  We need your help to keep it going.  Click the picture below to send us a question.  We’ll answer it on an upcoming show.

Investment Math

Ask A CFP Pro

Judging by the data, our ask a CFP pro show has been very popular.  We need your help to keep it going.  Click the picture below to send us a question.  We’ll answer it on an upcoming show. math Investment
Investment Math

 

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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Breaking News: Charles Schwab Acquires TD Ameritrade

TD Ameritrade is our primary custodian. They hold almost all of our client investment accounts. On Monday, they announced a deal with Charles Schwab.

Video: Schwab Acquires TD Ameritrade

Here are some highlights:

  • The deal is reported to be $26 Billion and is an all stock acquisition.
  • This will be the largest custodian for independent registered investment advisors. The combined company will hold over $5 Trillion of client assets.
  • When we created our own firm in 2016, we considered TD Ameritrade, Charles Schwab and Fidelity.  We felt TD was a better fit for us and for our clients.
  • We hope the merger will combine the best parts of Schwab with what we like about TD Ameritrade.
  • We don’t anticipate this to disrupt our clients.
If you have questions or concerns, please call.  (740)  373-4877 or (800) 860-4871

You can also email us at neal@flemingwatson.com or jim@flemingwatson.com

September Client Letter

September Client Letter

Quarterly reports will be mailed out very soon.  Included with those reports is our September Client Letter.  If you would like to download a PDF copy of the letter, click on th image to the right.

Click image to download

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Download our March Client Letter

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Our March Client Letter

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Click Here, to read our March Client Letter.  In this issue we address our reasons to be both optimistic and concerned about the stock market in the next few years.

 

Thanks for reading!

 

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You can read our previous client letters on our blog page.  We publish our client letters in March, June, and September each year and mail them to our clients.  In addition, we make them available here on our website.

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