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Keeping Up with the Joneses’ Retirement Plan

photo shows person looking at watch and holding coffee

Half our staff here at 228Main.com is under 40 years of age, and as you may realize, I’m… not 40.  

And I plan to work to 92.  

Suffice to say, my “retirement” plan won’t be the right model for everyone. But that doesn’t mean these younger staffers—and many clients their age—aren’t working on their own plans and planning. 

A client’s age or generation matter to a certain extent in our line of work. What we’ve noticed, however, is that the most important part is how each person relates to their age.

Think about my goals again. Of course my age is a factor in my planning, but my intention to continue working changes things more. If I were only working for 2 more years, my strategy would require a totally different gear than my plan to earn an income for 20 more years! 

Clients, I don’t mean to suggest you need to know your retirement date now—or even have an exact vision of your retirement lifestyle. In fact, what I want to suggest is that it’s okay if it feels like you’re saving for a fuzzy future self. 

“But how do I know whether I’m track? I should’ve started years ago, right?” We’ve heard this before.  

No guarantees, but if you’ve made it into a conversation where you’re asking someone you trust this question, you’re on your way. From here, it’s about working toward your goals. How your parents retired, how the plan goes in a chart in a pamphlet that gets stuffed into your hand… if you compare your plan to those examples, they can add more anxiety than applicability. 

Reframe. Retirement planning is about your goals, your timeline, your lifestyle. No external marker. 

Feeling behind? Arianna Huffington calls this sense of a ticking clock being in a “time famine,” a state where “your feeling is that it must be later than you think it is.” Feeling starved for time to do what you need to do is no foundation for a strong plan. 

“Yeah but how will I…” 

Ooh, good question! That’s where we come in, and we’d be honored to help you shape this vision. Reach out when you’re ready. 


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Two Secrets About Money and Time

photo shows a clock sitting in front of a calendar on a desk

“Wealth consists in caring less about what others think about you and more about using your money to control how you spend your time.” — Morgan Housel

We’re fond of the work of Morgan Housel, who strives to help folks change their relationship to money. In his definition of wealth, we notice two key ideas—ideas that could bring some clarity to our financial decisions.

Wealth Isn’t About Anyone But You

It takes only a moment to recognize the potential problems of using wealth to influence how others perceive us. The trappings of wealth can be had with borrowed money: a $10,000 watch for $200 monthly payments, a luxury car for a monthly lease payment. But the watch and the car are not proof of anything.

Ultimately, we do not control what others think. No amount of money gives us that power.

When we focus on meeting our own needs rather than some notion of what might impress others, we require less wealth to gain control and therefore focus. We may be able to retire earlier or work at a more rewarding endeavor on less money, should we choose… which leads us to the second key idea from Housel’s definition.

Time Is Money Is Time

The familiar phrase “time is money” comes to us by way of Benjamin Franklin, writing in colonial Philadelphia. Housel writes that wealth is about using your money to control how you spend your time. In short, he turns the idea upside down: money is time.

Carried to its logical conclusion, when we have enough wealth, we may retire and gain control over the time we formerly spent working. In the form of Social Security and pension benefits, investments and 401(k) balances, the money we’ve earned then buys us time. Money is time!

Housel adds a layer to our understanding of wealth, which magnifies the good it may do us.

When you are ready to talk about your time or money, email us or call. We’ll be ready to talk with you.


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Dealing with Financial Emergencies, Three Things

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The dramatic and unexpected events of 2020 have tested our adaptability and resourcefulness like no other. There are patterns in those who are navigating these times successfully.

1. Realize there are usually lessons in history to guide us; maintain perspective.
2. Avoid hasty decisions that could have negative long term consequences.
3. Look for the opportunity in the challenge, not vice versa.

By taking time to think about the context, understand our own situation, and get accurate information about whatever the new reality is, we usually can make better decisions.

In personal finance, tapping high interest credit cards to maintain spending in the face of income reductions may be necessary for some items. But any outlays that can be avoided, or are discretionary, should be deferred, not financed. The average credit card interest rate remains in double-digit territory, a huge drain.

In your investments, long term holdings should not be disrupted by short term considerations. When the situation changes in ways that everyone knows, the new circumstances are likely to be priced into the market already. So there may not be an edge in taking action. If you do not need the funds in hand for pressing purposes, you might leave them be.

The stress of the situation may be alleviated by working on things within your control. Practicing healthier habits with regard to exercise, nutrition, sleep, and alcohol can also reduce stress, while giving you a sense of conrol.

Finally, contact with other people is a necessity for social beings such as humans. It may be especially useful as you talk things out or need someone to bounce ideas off of. We would be happy to visit with you by phone or email, Zoom video or in person – about whatever is on your mind. Email us or call.

Can You See the Forest?

© Can Stock Photo / Elnur

The old saying, “Can’t see the forest for the trees,” refers to the difficulty we humans have in maintaining perspective, of keeping the larger context in mind. Our current challenges bring us reminders of this.

Recently we were discussing the prospects for investing in a food processing company. Market disruptions have knocked the cost of $1 of annual earning power down to $10 – an earnings yield of 10%. (Another way to say it: a price-earnings ratio of 10.) If one can purchase durable earning power in an enduring industry at valuations like that, the holding might be owned a very long time.

(No guarantees – there are a lot of assumptions in that last paragraph.)

A colleague asked us whether we were concerned about the impact of processing plant shutdowns. After agreeing that any shutdowns would likely be limited to a matter of weeks, this seemed to be one of those problems of perspective.

For none of the past few decades have the plants been shut down for a virus. Apart from the next few weeks, it seems unlikely that virus-related shutdowns will be much of a factor in the decades ahead.

The forest is that we humans will still need to eat in the future, and there is probably money to be made by meeting that need. The trees are the virus and the shutdowns and the disruptions. One of our key roles is working to see the big picture and striving to act accordingly. We need to be able to see the forest in spite of the trees.

Interestingly, the challenge of maintaining perspective may play a role in creating bargains. Investors who get too wrapped up in transitory effects may push prices to levels that don’t reflect the long term value. When current conditions fade, as they will, that value may become apparent. Again, no guarantees.

Clients, if you would like to talk about this or anything else, please email us or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The High Tech Rear View Mirror

© Can Stock Photo / canbedone

Once upon a time, we wrote that pretending present and future risk can best be measured by past volatility is akin to driving down the highway with eyes firmly planted on the rear view mirror. (Our theory is the future will not be like the past, so the windshield is a better thing on which to focus.)

The current market upset is the first one featuring the latest generation of so-called risk analytics. These high tech tools generate risk numbers for individual investments as well as entire portfolios. They are entirely based on past volatility. Incorporating frequent updates to the database of past price behavior and enabling near-instantaneous assessments expressed as an index number (say, 1 to 100), they seem quite scientific and highly analytical.

But all of this precision is predicated on the idea that past volatility is a measure of present and future investment risk. So in the latest version, it is like driving down the highway with eyes firmly fixed on an array of rear view mirrors, wide-angle and telephoto and high-definition.

The interesting thing is, when the inevitable downturn occurs, the ‘volatility equals risk’ crowd is quick to point out that their statistical methods are designed to predict what will happen, with a 95% probability. So if you run into a wall while focused on the rear view mirror, there was nothing wrong with the analytics – you just landed in the 5%.

Call us what you want, but a system designed to ferret out risk that fails exactly when you do need it to work may not be all that useful. (An elevator that does not crash to the basement 95% of the time would not be useful, either, in our opinion.)

We will continue to work with our understanding that volatility is a feature of long term investments. It necessitates a long time horizon, so the effect of temporary declines may be mitigated by time. Short term money needs to be kept out of long term investments. And we will keep our eyes focused on the future, not the past.

Clients, if you would like to talk about this or anything else, please email us or call.

Liquid Assets

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One of the keys to successfully weathering the downturns in the market, large and small, is having sufficient cash to do what you need to do in your real life. That helps avoid selling long term investments at bad times.

A few weeks back we went through investment advisory accounts to check cash balances for ongoing monthly distributions and make sure we had cash positions to last several months. And in our reviews with you, we inquire about upcoming cash needs.

As our lives unfold, our situations may change. For example, we talked with a pair of young adults a few weeks back, a brother and sister, who each are completing advanced degrees. In infancy, they received a gift of shares of stock from their great-grandfather, an old friend of mine.

Their holdings grew over the years. Each one called to talk about the strategy for paying off student loan balances later this year with the value of the accounts. When it became evident that the holding period was down to months, we advised the sale of sufficient stock to clear their balances, at once. Money that you plan on spending in the short term should not be invested for the long term.

The moral of the story is to communicate with us about exceptional cash needs that develop. If together we manage your liquidity to avoid untimely sales of long term investments, you and we will both be better off.

Clients, if you would like to talk about this or anything else, please email or call.

A Structural Reminder

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The ability to adapt to changing conditions is what sets those who thrive apart from those who merely survive.

Our portfolio theory evolves over time as economic and market conditions unfold. The problem with the textbook approach in a changing world is that a textbook, once printed, never changes. Looking at the world as it is and doing our own thinking, we see things in a new way.

Some time ago, we concluded that counterproductive monetary policies have distorted pricing for bonds and other income-producing investments. By crushing interest rates and yields to very low levels, the old investment textbook had been made obsolete.

Therefore the classic advice about the proper balance between stocks and bonds brings new and perhaps unrecognized risks, with corresponding pockets of opportunity elsewhere. Yet the classic advice met a need which still exists: how to accommodate varying needs for liquidity and tolerance of volatility.

Our adaptation to this new world is the portfolio structure you see above. Our classic research-driven portfolio methods live in the Long Term Core. We believe our fundamental principles are timeless, and make sense in all conditions.

But people need the use of their money to live their lives and do what they need to do. So a cash layer may be needed, tailored to individual circumstances.

The layer between is ballast. This refers to holdings that might be expected to fall and rise more slowly than the overall stock market. Ballast serves two purposes. It dampens volatility of the overall portfolio, thereby making it easier to live with. Ballast may serve as a source of funds for buying when the market seems to be low.

The client with higher cash needs or who desires lower volatility may use the same long term core as the one who wants maximum potential returns. One may want a ‘cash-ballast-long term core’ allocation of 10%-25%-65% and the next one 4%-0%-96%. It’s a free country, you can have it your way.

It may be time to review the structure of your portfolio. Clients, if you would like to talk about this or anything else, please email us or call us.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

New Lifestyles, New Plans

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It seems that life used to be plainly segmented. First we got educated, then we worked, then we retired.

Financial plans followed suit: first we accumulated during our working years, then we spent in retirement – hopefully, not running out of money before we died.

Increasingly in the 21st century, life is sliced and diced. Periods of education may happen at any age. People remake themselves to meet the needs of the marketplace, or their own preferences. Stretches of leisure may be mixed in with periodic bouts of consulting or other work in the golden years.

Some people choose to retire to volunteering or a new business venture or employment in a more enjoyable field, or seasonally, or part-time. There are a lot of ways to live life these days.

In addition to changing lifestyle patterns, people are living longer than ever before.

In this new environment, financial plans and planning need to be more flexible, and serve different purposes. The key theme: flexibility.

1. Investment products that tie your money up for years are less appropriate than before, as changing circumstances could mean an unforeseen need for liquidity.

2. The accumulation of funds in traditional retirement accounts still makes sense. Adequate funds make work optional in later years, or enable volunteer work or even a business start-up.

3. It may pay to pay more attention to tax brackets, as shifting circumstances could change tax status from year to year. Techniques to take advantage of low-bracket years may reduce lifetime total income taxes.

The key, of course, is not what the trends are or what many people are doing, but what YOU want to do. Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Teaching an Old Stock New Tricks

© Can Stock Photo / alexskopje

Consolidated Edison Company of New York (Con Ed) was listed on the New York Stock Exchange back in 1824. Known then as New York Gas Light, it holds the record for the longest listing on the exchange.

For every single day of those nearly two centuries, every share of its stock was owned by somebody. Through financial panics, recessions, wars, the Depression – through everything – every share of its stock was owned by someone.

It seems curious to us that some investment advisors advocate the belief that the vast majority of investors are incapable of owning shares of stock through the inevitable downturns. (Stocks do go up and down, as we often note.) Yet somebody has to own every share, every day.

These advisors with low expectations of you usually rely on one of two basic approaches.

1. Keep 40 to 60% of your long term assets in bonds or other forms of fixed income. This strikes us as an exceptionally poor idea for many long term investors, because of historically low interest rates, and potential losses from inflation and rising interest rates.

2. Expect to be able to sell out before big declines, and reinvest before big rises. This unlikely outcome is usually sold as a “tactical” strategy. It is a great one, too, but only on paper. Nobody to our knowledge has ever demonstrated a sustainable long term ability to reduce risk while maintaining market returns with in and out trading.

Our experience tells us that many people understand long term investing, and living with the inevitable ups and downs. Many more can be trained to become effective investors. We think you can handle the truth: real investments go up and down.

The thought of forfeiting a significant fraction of potential future wealth by pandering to fear of short-term volatility hits us wrong. We won’t do it here at 228 Main, nor would we pretend we our crystal ball works well enough for in and out trading.

Of course, our approach is not right for everyone. Clients must be able to live with their chosen approach, and not everyone can live with ours. We can handle the 60/40 or 40/60 mix for clients who want less volatility. But the fraction in the market is going to experience market volatility, a pre-requisite to obtaining market returns.

We mean no disrespect to advisors with different approaches. After all, they lack the main advantage we enjoy: working with the best clients in the whole world.

Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.