Our 2019 Investment Outlook, Ep #78

Our listeners and clients often ask us about the upcoming investment outlook. The beginning of the year is a great time to think about the future, so we try to create an investment outlook episode each year. We’ll provide charts at the end of the show notes to help demonstrate what we discuss on today’s episode, so be sure to check them out after you listen. If you are curious as to whether now is the time to jump into the stock market, what role bonds play in your portfolio, or what the experts say about the future of the markets then listen to this episode to hear all about our 2019 investment outlook.

Is now a good time to invest in the stock market?

Everyone always wants to know the big question: when should I invest in the stock market? Unfortunately, we don’t have a crystal ball. And if we did, we could quit our day jobs! If you are a long term investor a now is a good time to invest in the stock market. For long-term investments, any time is a good time to invest, but you have to consider your specific risk preferenes.

There's always something to be worried about when investing. There are trade wars and politics that are certainly a concern, but there is always something happening in the world that affects the stock markets. Fear of the unknown is always there. It can be easy to forget our past fears, especially when it comes to investing since that fear fades over time. The real question should be if you don’t invest now, when will you?

How do you evaluate when the best time to invest is?

If only we had that crystal ball then we would know exactly when the best time to invest in the stock market would be. Unfortunately, we don’t, and we must keep our day jobs. But we can rely on tools to help guide us. The CAPE ratio is a tool to help us study data over time. CAPE stands for Cyclically Adjusted Price to Earnings ratio. We never know what the short term may bring but the CAPE can give us an idea of where the markets are heading in the next 10 years. We love using tools like CAPE to help guide us, but it is important to remember that a market’s past performance cannot predict future results. We aren’t here to provide advice to anyone. Think of this show as helpful education to guide you to make more informed decisions after discussing your specific situation with your own financial advisor.

What is the purpose of bonds in your portfolio?

If you need the money in the next 5-7 years then it should not be in the stock market. So what should you do with the money you may need in the medium term? High-quality medium-term bonds are where you should have your money if you need it in the near future. There are 3 benefits of high-quality bonds.

Diversification from equity. Bonds provide diversification and bring balance to your portfolio. Safety capital preservation. High-quality investment grade bonds provide a safe way to preserve your capital. Interest payments. Bonds can provide a bit of yearly income

Bonds get a bad rap but they serve an important purpose in a portfolio. They are quite safe and yield higher than cash in the long-term.

What do the experts say about today’s investment outlook?

The heavy hitters like Vanguard, Morning Star, and Research Affiliates are seen as the top names in the field of investment. They generally agree that U.S. stocks will slow down in growth over the next 10 years. They predict that growth will be from 1%-5% in the U.S. stock market. Most of these experts predict that international markets will rise 5-7% over the next 10 years. However, nobody has a crystal ball which is why it is so important to diversify your portfolio. The power of diversification can protect you in market swings.

Outline of This Episode [1:37] Is now a good time to invest in the stock market? [4:41] How do you evaluate when the best time to invest is? [12:22] What is the purpose of bonds in your portfolio? [16:53] What is the role of cash in a portfolio? [18:20] What do the experts say? [20:35] How do you prepare for lower returns? Resources & People Mentioned Episode 24 Blog Post - Crystal Balls and CAPE Connect With Chad and Mike https://www.financialsymmetry.com/podcast-archive/ Connect on Twitter @csmithraleigh@TeamFSINC Follow Financial Symmetry on Facebook Subscribe To This Podcast

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