Back to The Fundamentals

Good Morning Relaxing Retirement Member,

2019 provided us with another year of lessons to be learned. On the heels of a sharp stock market correction in the fourth quarter of 2018, followed by dire predictions of doom and gloom amid a heated political climate throughout the year, financial markets generated stellar returns and our Retirement Buckets™ all grew substantially.

This is very good news and you should feel proud that you maintained the discipline and focus required to capture these market returns.

As hard as it is to believe, during a year in which every stock-based asset class produced double digit returns, significantly more money was redeemed from stock mutual and exchange traded funds during the year than was invested.

Another way of saying that is many investors lost their focus and discipline and missed
the boat!

While we should all allow ourselves a moment to feel good about capturing these results, there is potential danger in allowing the celebration to go on for too long.

As is the case with many athletes who experience the thrill of victory, there is the temptation to become complacent, lose our discipline, and forget the fundamentals.

Just like we don’t overreact when inevitable market corrections occur and stock prices temporarily drop like the Fall of 2018 when prices fell just shy of 20% from September 26th through Christmas Eve, or the historically severe 49% decline from 2000-2002 or the 56% decline from 2007-2009, we want to have the same reaction to our results in 2019 when market prices grew substantially, i.e. not get too high with the highs nor too low with the lows.

As your fiduciary and your Retirement Coach, my responsibility is to do everything I can to keep you grounded during all market conditions, to help you maintain your discipline so you can continue to make educated, rational, long term decisions.

In short, it’s my job to instill the discipline of adhering to the fundamentals.

The Fundamentals

An example of adhering to the fundamentals is maintaining your risk exposure to a pre-determined level through Retirement Bucket™ Rebalancing.

2019 was quite a year for stocks, especially U.S. based large cap companies and technology stocks. Both of their respective indexes grew in excess of 30%.

While this is certainly good news to experience these sizable returns, a common emotional response is the assumption that these two asset classes have momentum and will continue to rise in price this year thus validating many Americans’ desire to buy more.

What they forget during this emotional, and likely greedy, reaction are two very important points. First, any level of performance, and especially outer performance in any one direction as these two experienced in 2019, is no indication or signal of continued future performance, i.e. the famous tagline: past performance is no guarantee of future results.

The second point is that there is a flip side to overexposure to any individual stock, sector, or asset class: increased risk.

Ever since we originally created your Retirement Blueprint™, your Retirement Bucket™ has been strategically designed to capture the long-term investment returns of a diversified and calculated mix of asset classes while exposing you to an appropriate level of risk and volatility.

However, as we all witnessed again in 2019, the market price of these various asset classes moves up and down a lot throwing this carefully designed mix out of balance over time.

Extensive Academic research of markets over decades has demonstrated that out of balance investment portfolios, with asset classes that have grown beyond their target allocations, take on inappropriate risk exposures.

To deal with this issue, we strongly recommend and implement periodic and disciplined Retirement Bucket Rebalancing.

So, in order to ensure a consistent level of risk exposure for you, we continuously evaluate your current vs. your target Retirement Bucket allocation to determine if there is a need for rebalancing among all of your holdings.

The Relaxing Retirement Formula™

As we begin another year together, I believe it’s critically important for us to review and implement the fundamentals of what a Relaxing Retirement entails.

Retirement Bucket™ Rebalancing is a great example of this, especially right now.

In the coming weeks, we will be breaking down and instilling the fundamentals of The Relaxing Retirement Formula™ so you can continue to live your best life and do everything you want to do without any anxiety about money!

Committed to Your Relaxing Retirement,




Jack Phelps

The Retirement Coach

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(The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advice on tax matters specific to your situation.)