The one potentially huge investing mistake that has this pro saying “that’s wild to me”


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Skinny Love

For anyone not familiar with the band Bon Iver, let this be your introduction. The lead singer, Justin Vernon, was born in a small town in Wisconsin called Eau Claire. (Coincidentally, my dad went to college at the University of Wisconsin-Eau Claire, but I digress.)

One of Bon Iver’s biggest hits is a song called Skinny Love, which was not written about the stock market, but markets can be a lot like love songs (heartbreak songs?) so let’s roll with it.

The skinny in this context refers to the small number of stocks in the S&P 500 that are doing well, despite the index’s 7% YTD return. In fact, the number of stocks trading above their 200-day moving average has been decreasing since mid-April.


Those that remain above their 200-dma exhibit some similarities, which I’ll get to in a minute, but the important takeaway is that despite the market’s upside over the last month and change, the strength under the surface has actually deteriorated.

This is also evident when we compare the equal-weighted S&P with the market-cap weighted S&P, where the market-cap weighted index has outperformed the equal-weighted version by more than 700 basis points YTD. Message being, the “average” stock hasn’t kept up with its mega-cap cousins.

Eau de Performance

But does it matter? In my opinion, yes. The mark of a durable bull market is one with broader participation in the upside. In other words, we want to see more stocks than not pushing the index higher. Especially if we’re trying to explain a rally with proof points around economic strength — smaller-cap stocks, typically thought of as very economically sensitive, should be climbing.

That’s not the case right now, with the top quintile by market cap outperforming the bottom quintile by 11% since the October 2022 low. Comparatively, in a period of the same length following the 2009 market bottom, the performance pattern of market cap quintiles looks quite different — with the bottom quintile (smallest stocks) besting the top by a meaningful margin, and including strong participation from the middle quintiles. That’s good breadth; this is not.


Point being, although historical periods can serve only as a guide, we know with certainty that spring 2009 was the beginning of a durable bull market in the S&P…and it didn’t start like this.

Cyclical Exile

Many of you may not have heard of Bon Iver until they recorded some compilation songs with Taylor Swift, one of which was called Exile. Hence this section’s title of Cyclical “Exile.”

Seemingly in exile right now are some of the classic cyclical sectors such as Financials and Energy, which is another indicator that’s not exactly firing off “strong economy” signals. On the contrary, it’s sending more “late cycle” signals than anything else.

In January of this year, the weight of the largest five stocks in the S&P (Apple, Microsoft, Amazon, Alphabet, NVIDIA) surpassed the weight of the Financials and Industrials sectors combined (148 stocks in total). And the weights have diverged even further over recent weeks.


That’s wild to me. Investors are playing favorites in a big way, and they could continue to play favorites unless something changes. Nevertheless, this set-up makes me uncomfortable, which becomes even more confusing because oftentimes it’s when we are uncomfortable that we should buy.

But in this period when most signs point to “late cycle,” what could we buy? Treasuries, gold, defensives, cash…same old tune. Perhaps a tired narrative, but it’s worth noting that late cycle phases can last a long time, and I think that’s what we’re seeing right now. So rather than feel like my discomfort is a buy signal, I’m viewing my limited patience as a sign that we should wait a little longer — because the other common experience is just when our stamina is running out, the finish line comes into view.

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Smart financial strategies for Boomers worried about retirement

Smart financial strategies for Boomers worried about retirement

As you approach retirement, are you getting nervous about how much you’ve saved – or haven’t saved – to live comfortably for the rest of your life after you retire? If you’re worried you haven’t saved enough for retirement, you’re not alone.

Around 22% of Americans have less than $5,000 saved for retirement, 15% have no savings at all, and more than half (56%) of Americans don’t even know how much they’ll need to retire comfortably, according to Planning & Progress 2019, a study by Northwestern Mutual

Your future doesn’t have to be all doom and gloom, though. Even if you’re behind on saving for retirement, it may not be too late to create a better retirement for you and your family.

Keep reading for six last-minute strategies to add to what you’ve got or make the most of what you already have.

For help with your retirement planning, consider working with a fiduciary financial advisor. Find an advisor who serves your area today (Sponsored).

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Once you’re 50 years of age or older, you can start making “catch-up contributions” to some retirement accounts to increase retirement savings. Catch-up contributions up to $6,500 annually in 2020 may be permitted on 401(k) (other than a SIMPLE 401(k), 403 (b) or SARSEP plans.

You’ll have to comply with other IRS catch-up contributions, too. IRA annual catch-up contributions are limited to $1,000 until 2020. A SIMPLE IRA or a SIMPLE 401(k) plan may permit annual catch-up contributions up to $3,000 until 2020.

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If you’re not taking advantage of your employer’s 401(k) match, you’re throwing away free money you could squirrel away for retirement. Even if you’re already participating in your company’s 401(k), consider increasing your contribution to meet the annual limit of your employer’s match contribution.

That way, you can build retirement savings at a faster pace, with your employer’s assistance.

Not everyone is comfortable with taking more risk with their retirement account’s asset mix. However, if your retirement savings is not on track to offer what you’ll need to meet retirement goals, it may be time to think about increasing risk to get a higher return on investments.

Talk to your financial advisor or retirement planner to find out if adjusting your retirement account investment asset mix may help boost your retirement savings balance.

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Few people want to work for the rest of their lives, but not everyone is financially able to retire at the traditional retirement age of 65. Maybe you once planned to retire at an even younger age but are having second thoughts due to the rising cost of premiums you’ll pay before Medicare kicks in at age 65. Working longer may be the answer to your retirement savings quandary.

One reason to wait to retire is that the longer you delay collecting social security benefits, the larger the check you’ll receive each month. If you have health insurance through an employer, that’s another argument for delaying retirement, since health insurance could be a costly expense. Working a year or two longer also gives you more time to add to retirement savings.

istockphoto / Ridofranz

Cutting expenses is no fun, but neither is an impoverished retirement. What if you cut back now on a few luxuries and other expenses that your current income allows so you could sock away more every month for retirement savings? For example, you may be able to cut your grocery bill in half by shopping at a discount grocer or using coupons.

How much would you save if you got rid of cable and subscribed to a couple of streaming services instead? What if you got one massage a month instead of two or went an extra week between haircuts? Commit to taking any money you’d have otherwise spent and depositing it in savings instead.

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The retirement income you’ll need to barely squeak by in one city may allow you to live far better in a town or city with a lower cost of living. If you want your retirement savings to stretch further, think about moving to a more affordable region.

For example, the most expensive areas in the U.S. to live are Hawaii, Alaska, the Northeast and the West Coast, according to the third-quarter composite cost-of-living index at the Missouri Economic Research and Information Center, where you’ll find the annual cost of living in each state. The least expensive regions are Midwest and Southern states.

Tips for retirement planning

Need help planning for retirement? You can use free retirement calculators to help you start planning at any age. 

Additionally, a financial advisor can help you work out the details of your retirement plan. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. (Sponsored)

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