Monthly Market Snapshot & Top Financial Tip

A huge Mom Corps Dallas welcome to James Mathis and Michael Young of Aspen Equity Partners! Be sure to catch their guest post the first Wednesday of every month. They will provide the previous month’s market snapshot (thank goodness) and provide a relevant financial tip to help all of us realize our goals.

“Then one day you find, ten years have got behind you. No one told you when to run, you missed the starting gun.” – Pink Floyd

The S&P 500 index ended last week with a 1.07% gain at 1709.67. There were lots of potentially market moving economic data points for investors to focus on, including the Chinese purchasing managers index(came out ok), The Federal Open Market Committee’s (Fed’s) policy statement(no surprises), and the most important: the widely watched July jobs report.

The jobs report was a little disappointing, but just good enough to indicate the economy is growing, but not so quickly that the Federal Reserve would be inclined to tighten monetary policy any time soon. Nonfarm payrolls added 162,000 jobs in July after adding 188,000 in June. The unemployment rate fell to 7.4% from June’s 7.6%.

The most important component of the jobs data for Fed watchers is probably the average hourly work week, which was down slightly, and aggregate wages which were also down slightly. This is not indicative of an economy that is showing any signs of overheating, so likely will keep the Fed in an accommodative mode until the data points improve.

An old investor favorite, Apple Computer, may have regained some lost luster closing today at 469.45, up more than 6% in the last couple of weeks. Much maligned Facebook (at least by some investors) reported a great quarter and was up more than 10% last week; eclipsing its $38 IPO price by a nickel on Friday’s close. Big integrated oil companies Chevron and Exxon Mobil underperformed after reporting disappointing earnings.  They are not participating enough in the shale oil boom that the U.S. domestic producers are enjoying.

So, why the Pink Floyd quote? In March of 2009 the S&P 500 index closed at 676.53—a 13 year low. On Aug, 5th, 2013, the index closed at 1707.14. That is about a 150% gain. 

During, and in the aftermath of the financial crisis, a good number of people made career changes that they either initiated or otherwise.

One of the things that can get lost in the process is what happens to an employee’s 401k or pension plan after a job change. In a 401k, the employee may have had a limited number of investment options and hasn’t done any research on what to do with his retirement funds after leaving his employer.  In a traditional pension plan(somewhat rare these days), the employee will have had little say over the investment policy , and may get a lump sum check in which he or she has to figure out what to do.

The answer for most people is to roll over the funds into an IRA account. Usually the HR department of the ex-employer will help with the paperwork. It’s a little trickier with a lump sum distribution from a pension plan.

It’s best for most people to have the funds sent directly to the IRA custodian to deposit into their account.

So now the funds are in your new rollover IRA account—what do you do?

  1. Keep the same investments you had and come back in 15-20 years to see how you did?
  2. Keep all the money in cash because you don’t have time for this BS and the market is too volatile anyway.
  3. You have a good understanding of the financial markets and do you own research and know where you want to invest. You decide to open a low-cost account at a discount broker, and you know the appropriate asset allocation for your age and years to retirement. You pick low expense ratio index funds and re-balance from time to time.
  4. You hire a financial professional to help you with the process and the investment selection.

Which is best?

  • Choice 3 is the lowest cost option and high fees and expenses are the biggest detriment to investment performance. A savvy investor will likely do well with this option.
  • Choice 1 may be good for the procrastinator, but without researching your investments and understanding proper asset allocation, performance in this account is a roll of the dice.
  • Choice 2 is probably the worst choice for most unless retirement is right around the corner. The inflation rate right now is estimated to be around 1.5-1.6%. The Federal Reserves targeted inflation rate is 2%. If your money is in cash earning a next to nothing interest rate, your cash loses 1.5-2% of its value every year.
  • Choice 4 is probably the best choice for time constrained people that aren’t comfortable with the financial markets, and those that would like to work with someone who has their financial best interests at heart. Choose a fee only financial advisor that is a fiduciary. Make sure that you are comfortable with this person, and that he or she is a great communicator. The financial advisor can develop an investment plan that is tailored to your specific needs and goals. This person should be a resource for you and be able to explain your investment strategy, meet periodically to go over you plan or any life changes, and be available to answer any questions about your accounts.

jimfinalheadshotJames Mathis, CEO of Aspen Equity Partners (AEP), believes in enriching his clients’ lives by identifying, preserving and achieving their goals. Aspen partners with clients through every leg of their race ~ asset management, investment advice and retirement planning. Contact him at