Advice is one thing. Education is another. Welcome to our area dedicated to highlighting Sensenig Capital’s perspective on private wealth management, unbiased investment advice, and comprehensive financial planning. You’ll find articles designed to inform and enlighten. Spend time browsing through the topics to learn more about our approach and what we believe.
By design and intent, we are and will remain an independent, fee-only Registered Investment Advisor firm, dedicated to advising our clients on how to best manage their wealth – all of their wealth – according to their own cherished goals. We are dedicated to being transparent and caring and fiduciary. With or without any regulatory requirements, this is what we do; it’s who we are. It’s bred in our bone. As the DOL rule begins to (hopefully) improve on the retirement planning advice that all investors receive, we welcome any questions you may have about its impact on your own interests. In the meantime, if you notice other firms mimicking us as a result of the new requirements, you might want to ask them: What took you so long?read more
As we’ve discussed in the first two parts of this three-part series, we do not recommend turning to dividend-yielding stocks or high-yield (“junk”) bonds to buttress your retirement income, even in low-yield environments. So what do we recommend? Today we’ll answer that question by describing total-return investing. Part III: Total-Return Investing for Solid Construction If you think it through, there are three essential variables that determine the total return on nearly any given investment: Interest or dividends paid out or reinvested along the way The increase or decrease in underlying share value: how much you paid per share versus how much those shares are now worth The damage done by taxes and other expenses Total-Return Investing, Defined Instead of seeking to isolate and maximize interest or dividend income – i.e., only one of three possible sources for strengthening your retirement income – total-return investing looks for the best balance among all three, as they apply to your unique financial circumstances. Which strategy is expected to give you the highest total return for the amount of market risk you’re willing to bear? Which is expected to deliver the most bang for your buck, in whatever form it may come? If you’re thinking this seems like nothing but common sense, you’re on the right track. Last we checked, money is money. In the end, who wouldn’t want to choose the outcome that is expected to yield the biggest pot given the necessary risks involved? Why would it matter whether that pot gets filled by dividends, interest, increased share value, or cost savings from tax-wise tactics? In Total-return investing: An enduring solution for low yields,” Vanguard describes the strategy as follows: “Many investors focus on the yield or income generated from their investments as the foundation for what they have available to spend. … The challenge today, and going forward, is that yields for most investments are historically low. … We conclude that moving from an income or ‘yield’ focus to a total-return approach may be the better solution.” And yet, many investors continue to favor generating retirement cash-flow in ways that put them at higher risk for overspending on taxes, chipping away at their net worth and weakening the longevity of their portfolio. We’re not saying you should entirely avoid dividend-yielding stocks or modestly higher-yielding bonds. With total-return investing, these securities often still play an important role. But they do so in the appropriate context of your wider portfolio management. Let’s take a look at that next. The Related Role of Portfolio Management The tool for implementing total-return investing is portfolio-wide investment management. Decades of evidence-based inquiry informs us that there are three ways to manage your portfolio (the sum of your investment parts) to pursue higher expected returns; more stable preservation of existing assets; or, usually, a bit of both. The most powerful strategies in this pursuit include: Asset allocation – Tilting your investments toward or away from asset classes that are expected to deliver higher returns … but with higher risk to your wealth as the tradeoff Diversification – Managing for market risks by spreading your holdings across multiple asset classes in domestic and international markets alike Asset location – Minimizing taxes by placing tax-inefficient holdings in tax-favored accounts, and tax-efficient holdings in taxable accounts By focusing on these...read more
In Part I of our three-part series on investing for retirement income in low-rate environments, we explained why we don’t advise bulking up on dividend-yielding stocks as a reliable way to generate retirement cash flow. Like the Three Little Pigs’ straw house, dividend-yielding stocks can disappoint you by exhibiting inherent risks just when you most need dependability instead. Another popular tactic is to move your retirement reserves into high-yield, low-quality bonds. Let’s explain why we don’t typically recommend this approach either.read more
In this three-part series, we’ll explore each of common strategies or retirement income investing and explain why the evidence supports building and preserving your retirement reserve through total-return investing. The approach may require a bit more prep work and a little extra explanation, but like solid brick, we believe it offers the most durable and dependable protection when those hungry wolves are huffing and puffing at your retirement-planning door.read more
That which best serves investors ultimately best serves their financial advisors as well, so we would warmly welcome a world where good advice reigns supreme. Until then, we hope you’ll be open to good advice when you hear it – the kind that sees you through turbulent times, onward to your relevant financial and life goals. If this advice sounds a little different from the typical hot investment tips or market-timing tactics you may be used to hearing, that’s because it is. May we offer you additional advice about good advice?read more