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Monday, January 19, 2015

Social Security Statement

Does it seem like it’s been a while since you've received any mail from Social Security explaining your benefits? That’s because it probably has been a couple of years since you've seen a statement; the Social Security office stopped sending statements in mid-2011. They recently announced they will send statements to workers attaining ages 25, 30, 35, 40, 45, 50, 55 and 60 and over who are not receiving Social Security benefits and who are not registered for an online account. The office is encouraging everyone to create an account at Having this online account allows workers to verify their earnings every year, estimate their future benefits and change their address among many other things. So get online and create your account, but make sure to pay attention as you are navigating the security questions. The access is secure and in order to create your account you will be asked some personal and potentially throwback questions!

Monday, January 12, 2015

Lead, Don't Chase

So you get your 401(k) information or go online to look at your account. While you’re there, you start looking at the investment choices. Wow! Some of these investments have some very high year-to-date returns. You notice that there are several investments with better returns over the last year or even three years. It makes sense to move your investments over to those better performing investments, right?

This is an example of a well-known concept in investor behavior called “chasing return”. 

We tend to take short term observations and assume they will continue for the long term. In investing this can be dangerous. Performance cycles of different asset classes can take many years. During that cycle, there are going to be times when the asset classes both over-perform and underperform. If we are moving our investments into choices that have over-performed in the short term, we are much more likely to participate in the underperformance part of the cycle. In other words, we are likely going to be buying high and selling low.

The challenge is that it is very difficult for us to have the courage to buy those investments that have underperformed. It works against our human nature. This is why using a diversified asset allocation that fits your risk tolerance and then rebalancing on a regular basis makes so much sense. Your asset allocation automatically shifts investments from the asset classes that have over-performed to those that have underperformed. You are now leading instead of chasing!

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Past performance is no guarantee of future results. Asset allocation does not ensure a profit or protect against a loss.