Investor Minute

How bad is buying at the peak of the market?

How bad is buying at the peak of the market?

Roy Sullivan was enjoying a quiet Saturday morning of trout fishing when the lightning bolt struck. It hit him on the top of his head and exited his lower body, causing burns down his chest and abdomen. Stunned by the strike but still alive, Sullivan was returning to his car when a black bear charged out of the woods and tried to steal his string of freshly-caught fish.

This was the seventh documented occasion that Roy Sullivan had been struck by lightning.1

If you wanted to imagine a similar string of bad luck in the world of investing, you might think of a person who only puts money into the market a few days a year, and by some stroke of extraordinarily bad fortune, each of those days happens to be when the market has reached a new all-time high.

After all, there's only one direction you can go from a peak.

This is, in fact, one of reasons some investors choose to use "dollar cost averaging" when investing large sums. This method divides a larger sum into smaller increments to invest into the market over a period of time, with the hope of minimizing the risk that you chose to put it all in on the “worst” possible day.2

But is a new market high the “worst” possible day if your investing time horizon is several years or even decades?

Advisor and financial writer Ben Carlson wondered how much it would cost someone to experience this perceived bad luck. He asked: What would happen to your returns if you invested only on the market's peak days?3

What he discovered runs contrary to conventional wisdom.

First, Carlson looked at the frequency of new all-time high days. He defined these as days when the S&P 500 reached a value that superseded its previous high. For example, he determined that from 1988 through 2020 there had been more than 600 all-time highs, about 7.3% of all trading days.

Next, he compared returns for buying the index over time versus buying only on the peak days. The results are surprising. According to his calculations, a person who invested only on peak days would have had slightly better returns than a person who spread out their purchases over all days.

"All-time highs tend to beget all-time highs," he says, "simply because that's the way the markets work in a raging bull."

Carlson doesn't recommend trying to target all-time highs specifically as an investing strategy. There's no way to predict when new peak days will occur. Rather, he points to it as a demonstration that investing at all-time highs doesn't have to be a losing proposition.

Of course, the past performance of the market is no indicator of how it will perform in the future. And historically, there have been some long periods between successive all-time highs. But the evidence suggests that new highs can be as temporary as whatever recent low you’re measuring.

Investing for the long haul means following the evidence rather than your instincts. So, a prudent investor will take a broadly diversified approach with the close support of a trusted financial advisor.



Sources:
1. http://go.efficientadvisors.com/e/91522/iki-Roy-Sullivan-Seven-strikes/6y8pfs/1195895109?h=L5M_wV9Ms7xMOL-psUC1C5rAy-c3T7BJp0pDjT19eJs
2. http://go.efficientadvisors.com/e/91522/erms-d-dollarcostaveraging-asp/6y8pfv/1195895109?h=L5M_wV9Ms7xMOL-psUC1C5rAy-c3T7BJp0pDjT19eJs
3. http://go.efficientadvisors.com/e/91522/g-in-stocks-at-all-time-highs-/6y8pfx/1195895109?h=L5M_wV9Ms7xMOL-psUC1C5rAy-c3T7BJp0pDjT19eJs

Disclosure:
The views expressed herein are exclusively those of Benedetti Financial, Inc. and Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

Learn more
<b>The origins of Memorial Day: remembrance and reconciliation</b>

The origins of Memorial Day: remembrance and reconciliation

In April of 1862, the Confederate Army of the Mississippi attacked the Union Army of the Tennessee, resulting in what was to be known as the Battle of Shiloh. It proved to be the bloodiest engagement of the Civil War up to that point. The nearly 24,000 dead, wounded, captured, or missing totaled almost twice the casualties of any previous battle.1

Because the engagement was fought near the Tennessee/Mississippi state line, many of the Confederate dead were buried in Columbus, Mississippi. But some Union soldiers were also laid to rest in the same cemetery, setting up an act of reconciliation that would go on to inspire the country.2

In 1866 four women from Columbus decided to decorate the graves of their war dead. This was not unusual. For all of recorded history humans have honored the resting places of their fallen heroes. But it's what these women did next that drew national attention. Not only did they lay flowers on the tombs of the soldiers who fought on their side, but they also laid them on the graves of their enemies—the Union soldiers. And then they went a step further and sent notes of condolence to the northern soldiers' families.

This conciliatory gesture was noted in newspapers around the country. And Francis Miles Finch, who read about it in a New York paper, devoted a stanza to it in his 1867 poem The Blue And The Gray:

From the silence of sorrowful hours
The desolate mourners go,
Lovingly laden with flowers
Alike for friend and foe;
Under the sod and dew
Waiting the judgement day;
Under the roses, the Blue,
Under the lilies, the Gray.3

The remarkable gesture by the women in Columbus may very well have been the genesis of Memorial Day as we observe it later this month. Our national day of remembrance for those who died in battle (or from wounds received in battle) was enacted as a recognition of the many local memorial days that were already taking place around the country.

Knowing this story, we have a reason to be doubly inspired this Memorial Day.

First, by the great sacrifice made by the men and women who have died fighting for our country. And second, by the women from northern Mississippi who chose to lay aside bitterness and instead pursue peace through an act of compassion.

We wish you and your family a happy and meaningful Memorial Day.



Sources:
1. http://go.efficientadvisors.com/e/91522/wiki-Battle-of-Shiloh/6y5y2q/1189402625?h=bEzIRyp1tutnJtI4kXQFDIZw5UzPa9hp6UpKtezt1Jc
2. http://go.efficientadvisors.com/e/91522/-the-blue-and-the-gray-388511-/6y5y2s/1189402625?h=bEzIRyp1tutnJtI4kXQFDIZw5UzPa9hp6UpKtezt1Jc
3. http://go.efficientadvisors.com/e/91522/blueandgray-html/6y5y2v/1189402625?h=bEzIRyp1tutnJtI4kXQFDIZw5UzPa9hp6UpKtezt1Jc

Disclosure:
The views expressed herein are exclusively those of Benedetti Financial, Inc. and Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

<b>Would knowing the future change how you invest?</b>

Would knowing the future change how you invest?

The idea of somehow getting tomorrow's news today is an intriguing one. What would you do if you had this knowledge?

In the 1944 movie It Happened Tomorrow, the protagonist, a journalist, is given a newspaper from one day in the future. He tries to use this information to scoop a big story, prevent a box office robbery, and make a few extra bucks betting at the horse track.1

In Early Edition, the 1996 TV series with a similar premise, our hero decides to use his foreknowledge only to prevent tragedy. Though his best friend, with whom he shares his secret, tries to use the advance information to make money in the stock market.2

Investment manager and financial author Barry Ritholz considers a similar scenario on a larger scale: Imagine if you woke up on January 1, 2020 knowing that, within weeks, a pandemic would sweep the world. Would you have been able to beat the market by changing your investments?3

This foreknowledge is not as specific as having tomorrow's stock prices or which horses to pick to win the trifecta in the fourth race. But you'd think that knowing ahead of time about an event as big as COVID19 would position you to make an easy killing.

Not so fast, says Ritholz.

Even knowing for sure that the coronavirus would become a global pandemic does not give you actionable investment direction. Ritholz lists five further pieces of information you would have had to obtain in order to beat the market.

  1. The severity of the pandemic
  2. The countries most affected
  3. The specific ramifications of the pandemic
  4. The fiscal response by governments
  5. The sectors and stocks that would benefit from all this

"Once laid out this way," writes Ritholz, "it becomes clear how challenging investing around a giant global event might be."

We now know that investors with broadly diverse portfolios, who made no major changes, earned healthy returns in 2020. A surprising result during a global health crisis.

Ritholz notes that investors learn about significant world events every day. And for nearly all of them the best approach is "to do nothing, stick with their plan, and let the markets run their course."

By the way, the main characters in both It Happened Tomorrow and Early Edition found their foreknowledge to be much more trouble than it's worth. People get very suspicious when you appear to know too much.

As a prudent investor, you don't need special knowledge of the future. Instead, you're better off with a disciplined plan that relies on global diversification to pursue long-term success, no matter what tomorrow's headlines might say.



Sources:
1. http://go.efficientadvisors.com/e/91522/wiki-It-Happened-Tomorrow/6wqrxt/1124600796?h=eNAcqzVu1H9ek7oDYxV9mB1D221CmYfmbfhagW-TMkA
2. http://go.efficientadvisors.com/e/91522/wiki-Early-Edition/6wqrxw/1124600796?h=eNAcqzVu1H9ek7oDYxV9mB1D221CmYfmbfhagW-TMkA
3. http://go.efficientadvisors.com/e/91522/bal-stock-markets-95-trillion-/6wqry1/1124600796?h=eNAcqzVu1H9ek7oDYxV9mB1D221CmYfmbfhagW-TMkA

Disclosure:
The views expressed herein are exclusively those of Benedetti Financial, Inc. and Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

Things to consider as you tackle your 2020 taxes

Things to consider as you tackle your 2020 taxes

An unusual year for employment and government benefits is making for an unusual tax season.

The first thing you need to know is that the IRS has moved the deadline for filing your 2020 Federal tax return to May 17. (Your state has most likely also extended the deadline for filing, but be sure to confirm this for your specific state.)

According to the non-profit Tax Foundation, part of the reason for this year's delay is because many people are facing a complicated tax picture. But possibly a bigger factor is that the IRS needs more time to clear its backlog of tax returns and correspondence.1

A second major thing that could impact your return is any stimulus money you may have received. The IRS and Treasury Department sent two rounds of these payments in 2020. Officially called Economic Impact Payments, these were technically tax credits advanced to individuals based on their 2018 or 2019 adjusted gross income (AGI).

If for some reason you did not receive these payments, you can claim the credit on your return. Or if you received only partial payment or no payment because your AGI was above the threshold in 2018 or 2019, and your income for 2020 was lower, you may be eligible for an additional payment.

Did you receive unemployment benefits in 2020? Last year saw lawmakers respond to the unprecedented increase in unemployment with hefty increases in the payment of unemployment insurance. As they are paid out, these benefits are considered taxable income. However, the recently signed American Rescue Plan Act (ARPA) excludes the first $10,200 in unemployment benefits for filers earning less than $150,000 per year.

Finally, the coronavirus relief package passed at the end of last year included an adjustment to the way the Earned Income Tax Credit and the Child Tax Credit are calculated for 2020. Normally, both credits are calculated based on income, a number which went down for people who lost their jobs. So this year, filers who made less in 2020 can do a "lookback" where their tax credit is based on their 2019 earnings, giving them a more generous credit.

These are just a few of the noteworthy things to consider as you file your taxes for 2020.

With new rules and greater complexity this year, consulting with a qualified tax professional is an important part of managing things that impact your financial life. Then with that information in hand, talk to your trusted advisor about ways you can adjust or integrate tax strategies with investment strategies.



Sources:
1. http://go.efficientadvisors.com/e/91522/2021-tax-season-/6xc1z2/1148998913?h=cxgD_mB-_x4LI4OUAG3-k32Qy7b35RsOgOnBttlKjv4

Disclosure:
The views expressed herein are exclusively those of Benedetti Financial, Inc. and  Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

<b>The mother who inspired Mother's Day</b>

The mother who inspired Mother's Day

You've probably heard the old saying, "Success has many fathers. But failure is an orphan."1 If you altered that quote to make it about Mother's Day, you could begin, "Success has many mothers."

Since being declared a national holiday in 1914 by President Woodrow Wilson (always the second Sunday in May), Mother's Day has been a huge success.2 Americans spend billions on cards and flowers to honor Mom, and the restaurant industry reports that it is consistently the biggest day of the year for dining out.

Along the way, several American towns have claimed the distinction of holding the precursor to the official holiday.

History professor Katharine Lane Antolini notes that at least four different people have been credited with its invention, including Notre Dame football coach Frank Hering who required students to write a note to their mothers once a month.3 But she concludes that the honor should go to Anna Jarvis, an advertising copywriter, who on May 10, 1908 organized a day to honor mothers in her hometown of Philadelphia.

Jarvis's inspiration was her own mother, Ann, whom she often heard advocating for a day when mothers would be honored. But historian Antolini points out an important distinction between Mothers' Day as envisioned by the elder Jarvis in the 1870s, and Mother's Day as it came to be celebrated in the early 20th century. (Note the difference in the placement of the apostrophe changing the possessive to plural.)

"Evidence suggests that the original idea was for a Mothers' Day—a day for mothers, plural, not a day for one's own mother—on which mothers would get together for a day of service to help out other mothers who were less fortunate than they were."

Ann Jarvis (the mother) demonstrated this spirit of women-helping-women in her work to improve the health of mothers and their children. In her native West Virginia it's estimated that 15-30% of infants died before their first birthday. Ann herself saw only 4 of her 13 children reach adulthood.

Anna Jarvis (the daughter) chose not to incorporate this community service aspect into her idea of Mother's Day. Antolini speculates that this is because she was not a mother herself and so didn't feel it would be appropriate for her to lead a movement encouraging mothers to be socially active.

Being a mother is not an easy job. Each generation faces a new set of challenges as they try to prepare their children to go out into the world.

This Mother's Day we want to honor all women who are filling this role, and join those who heartily agree with President Wilson when he proclaimed that mothers are deserving of "a public expression of love and reverence."



Sources:
1. http://go.efficientadvisors.com/e/91522/thers-but-failure-is-an-orphan/6xsxh4/1170785365?h=_0ZlS7wT4E5hkPEpwS3laRicxbpcfeU973mdQ4DeKX8
2. http://go.efficientadvisors.com/e/91522/olidays-mothers-day-facts-155-/6xsxh6/1170785365?h=_0ZlS7wT4E5hkPEpwS3laRicxbpcfeU973mdQ4DeKX8
3. http://go.efficientadvisors.com/e/91522/4-mothers-day-history-origins-/6xsxh8/1170785365?h=_0ZlS7wT4E5hkPEpwS3laRicxbpcfeU973mdQ4DeKX8

Disclosure:
The views expressed herein are exclusively those of Benedetti Financial, Inc. and Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.