Our Writings

Monthly Recap – November 2009

November. . . At A Glance (2009)

After the equity markets took a healthy breather in October, the markets again strengthened in November. In general, leading economic indicators and data are still positive and increasing in breadth. Risk, however, was not rewarded across the board and more conservative investments showed relative strength. Larger companies outperformed smaller companies and the U.S. equity market generally outperformed foreign markets.

The Central Banks of the world continued their pledges to keep short term rates low. Interestingly, while the yields in shorter and intermediate maturity bonds (less than 10 years) shifted down due to Central Bank actions and bond investors’ skeptical view of the equity markets, the longer maturities tended to stay the same, or shift up slightly.

It appears as though the bond market sees a floor to longer term inflation rates and the real rates of return that are required. Therefore, we are maintaining our underweighted allocation to long-term bonds, as it may shift up quickly once the tide turns.

The decreasing yields in the intermediate and shorter term maturities buoyed the bond indexes, with somewhat broad based gains. Consistent with the equity markets, strength seemed to lie in more conservative bonds.


Watching the market go by? Here’s how to step back in…

First, understand why you chose to get out in the first place. If…

  • your portfolio was riskier than you thought and the losses were more than you can handle, this may mean that even after you are fully back into the market, you should keep portfolio risk lower than what it was before.
  • you exited the market as a tactical move, simply because you thought it would go down, then perhaps your risk level was appropriate and will not need adjusted.

Methods for market re-entry:

Staged Re-Entry: The riskiness of market re-entry is reduced if you take a staged approach. Recent research shows that a staged re-entry between 2 and 6 months is probably optimum. Those that could not handle their portfolios risk before are likely good candidates for a staged re-entry.

Jump in all at once: Equity markets outperform cash for the majority of time periods, therefore, any time your assets are in cash instead of equities you have a high probability of underperformance. A note of caution: If the riskiness of your portfolio is too great for your tolerance, new market turbulence may cause “whiplash” to your portfolio (getting in and out at the wrong time again).

For more information on market re-entry, read this Fidelity article as we were interviewed for regarding market re-entry.

Take $24,000 out of the bank and NEVER pay taxes on it again!

This is an easy decision for most of you. If you are a high earner, you have been disallowed to contribute to an IRA or Roth IRA. Over the next two months, however, you can make non-deductible contributions to a Traditional IRA for both 2009 and 2010 tax years.

Then, in 2010 you can convert it to a Roth. If you do this for both yourself and your spouse and are over 50 years of age, you’ve just converted $24,000 into an asset you’ll never have to pay taxes on again!

Why is this beneficial?

All else being equal, Roth IRA’s are more beneficial as:

  • Your future tax rate becomes higher
  • Your length of time until you withdraw is higher
  • You leave assets to future generations

Regular IRA’s are more beneficial as:

  • Your current tax rate decreases
  • Your expectations of “game changing” events are lower (i.e. Congress deciding to tax Roths, etc.)

In addition, if you have bequest motivations, Roth IRAs do not have Required Minimum Distributions as seen with Traditional IRAs.

The earlier the better in converting your IRA into a Roth next year! The analysis of whether this would be beneficial takes time, and you could benefit by taking actions in 2009 from a tax perspective. For our free report, click here.

To learn how to convert half of your IRA to a Roth, but pay taxes on less than half, please call Clint directly. 614-469-4685 (We do not publicly share this strategy)

Independence.    Diligence.    Transparency.

Our founding principles have helped our business grow. We would love to show you  how these principles can help your portfolio!

We specialize in helping business owners identify gaps, reduce risk and invest assets in a way that will enhance their objectives.

Clint Edgington, CFA
Beacon Hill Investment Adivsory
Mark Fissel, RFC
Beacon Hill Investment Adivsory
Posted in: Newsletters

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