- 10-year U.S. Treasury bonds pay less than 2.0% per year. In other parts of the world, yields on government bonds are effectively negative if held to maturity.
- The U.S. equity market has produced significant gains since the market low in March 2009.
- Low yields on fixed income investments combined with large recent gains in the U.S. equity market means that investors should expect lower returns in the future. As a result, retirees may need to adjust their annual withdrawal rate lower, while younger workers may need to save more or work longer prior to retirement.
- Starting point plays a large part in determining total return for investments over various time frames. Considering we have been in a favorable environment for attractive total returns over the past 7+ years, we believe investors should be prepared for inevitable short- to intermediate-term bouts of market declines and increased market volatility.
- Considering the heightened possibility of lower future returns, investors need to pay particular attention to the fees being paid in their accounts and to the individuals managing their accounts. These include the fees paid to their advisor, the commissions generated through the sale of investment products by their broker/insurance agents, trading expenses and expenses (expense ratios) on their underlying investments, etc. The importance of managing costs is one of our core beliefs. Ask us about our fee transparency.