2 Minutes With Magis Wealth Planning 6/9/17

“2 Minutes With Magis Wealth Planning” is published on the second Friday of every month.  It is comprised of five brief thoughts that we’ve come across during the course of our daily reading and research.  It summarizes data points that we find both relevant and interesting on various topics including investments, retirement, taxes, industry news, etc. 


  • Through the first five months of the year, almost 50% of the S&P 500 Index’s total return has come from only 14 companies, with the top 5 comprising about 33% of the total return (with AAPL leading the way). Some have said that this is an argument against  However, we agree with a recent article by Bob French at Retirement Researcher that it is, in fact, the exact opposite. Without diversification in a top-heavy market like has occurred this year, you have to be able to correctly predict (or guess) which stocks are going to be the market drivers in that given year.  It seems easy in retrospect – no one claims to be surprised that AAPL is up ~33% year to date.  However, it is actually underweighted in actively traded global mutual funds when taken collectively compared to AAPL’s market capitalization.  So, taken as a whole, professional money managers have been wrong about AAPL this year so far.  Of course, AAPL performed in line with the S&P 500 Index last year and actually underperformed in 2015.  The point is, predicting the future is not easy, and while diversification doesn’t result in homeruns, it ensures you don’t miss out completely.   https://retirementresearcher.com/five-companies-comprise-sp-500-returns-death-of-diversification/


  • It’s not always easy to make the transition from saving for retirement to spending in Many retirees spend less than they can afford in order to avoid dipping into their nest egg for fear of running out of money later in life. Here’s some useful advice from Santa Clara University finance professor Dr. Meir Statman (as penned in his recent WSJ article): Don’t put off spending for enjoyment if you have an adequate retirement portfolio, because most people are less inclined to spend money as they get older due to physical limitations or personal reasons (e.g. illness or death of a spouse). A household headed by an 80 year old spends 43% less than a household headed by a 50 year old, which is why we do a detailed cash flow projection every year with our clients – to help identify if they can (or should) be spending more money. And to provide them with the peace of mind (based on real data) that it’s financially prudent to do so.   https://www.wsj.com/articles/the-mental-mistakes-we-make-with-retirement-spending-1492999921


  • Other nuggets of wisdom from Dr. Statman from the same article: 1) Don’t wait until you’re gone before bequeathing the majority of your estate – this deprives you of the joy of giving.  2)  Don’t try to beat the market – to do so requires a higher risk level at a time when most can’t afford to do so because their working years (i.e. “human capital”) are behind them.  3)  Be careful not to cross the line between frugality and miserliness – it prevents people who have enough money from enjoying it.  4) Young people tend to underestimate their longevity while older people tend to overestimate it.  He cites data that a person reaching age 65 today can expect to live until their mid-80’s with 25% living past age 90 and 10% living past age 95.


  • An article in the June edition of the Journal of Financial Planning cites several alarming statistics, including that 64% of Americans do not have a will and only 71% of Americans do not have either a medical directive or a general power of attorney. These basic estate planning documents are not difficult or very expensive to put in place, but are important to have – but not for you.  These documents go a long way in easing the burden for your loved ones being left behind.


  • The Chart of the Month: This chart shows that while the S&P 500 Index has finished in positive territory about 80% of the time over the last 20 years, it is also very common to have rather large market corrections during the year.

SP500 Dips

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