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Below are links to sources of information which Kurfees Capital trusts. Posts are used with permission.
Historical Summary of the Markets and Economy
Above is the link to Crestmont Research’s summary of investing principles based on their years of researching the markets and economy.
Crestmont Research’s charts illustrate how, over the last century, market cycles reflect PE values and deflation or inflation’s impact on earnings. Low, steady inflation produces a rising market since the quality of earnings is stable. High inflation and deflation drive down the quality of earnings and, thus, the price paid for future earnings (PE). Secular bull markets normally start when PE has reached 10 or lower while secular bears normally start when the PE reaches the mid 20s or higher
The three components of a stock that aggregate to produce the stock’s return are: earnings growth, dividend yield and change in PE. These three variables fluctuate for various reasons causing seasons of higher than or lower than average returns. (Source: Crestmont Research)
Crestmont Research illustrates the sobering impact of portfolio losses and the amount of return necessary simply to return to even. Investors can lose years of return in a matter of days and can have their lifestyle impacted for the remainder of their life. Risk of loss must be understood by investors and managed in portfolios tied to core goals such as retirement.
Stock investing is a volatile endeavor, and volatility isn’t the enemy. Crestmont Research illustrates the percentage of time the market swings significantly.
Average Return will not occur for years
The thesis of this white paper by Crestmont Research is that Baby Boomers will not enjoy the market’s historical average return of almost 10 percent for various reasons. In fact, the likely return will be a little better than half that level. If true, then this fact has significant planning implications regarding funding Boomers’ retirement lifestyle including how long Boomers might need to work.
The health of the economy and the rise and/or fall of stock values aren’t necessarily highly correlated. Crestmont Research offers important insights regarding this topic.
Retirement Portfolio Durability
Possibly the most important aspect of a portfolio is its ability to endure market volatility and withdrawals to fund goals.
The Benefits of Low Correlation
Correlation pertains to how investments in a portfolio generate return. Like a sports team with players who contribute expertise in their specific roles, portfolio investments ideally contribute return unique to the other investments providing different engines for growth and minimizing the herd effect downward. Low correlation hopefully provides a smoother ride upwards but not always (as occurred in 2008).
Active versus Passive Investing Debate
KCM believes blending passive and active investing strategies takes advantage of each one’s strengths.
Impact of Asset Allocation on Portfolio Recovery
Asset allocation provides important return attributes necessary for successfully reaching long term funding goals.
