Did You Hear?

Hello,

Did you hear? University of Iowa basketball player Caitlin Clark broke the late “Pistol” Pete Maravich’s scoring record. During Clark’s basketball career she’s scored more than 3,685 points as of this writing. Here is a video of her breaking the record. A once in a generation occurrence, and a remarkable feat.

It’s fun to watch her drive into her opponent and then pull back and lob an off-balance three pointer. Somehow, they normally go swish! It’s entertaining to say the least. March Madness is sure to be action packed!

Caitlin Clark pictured. Photo ncaa.org.

When it comes to investing, records are being cemented too. From MSN, “US household net worth hit a record $156.2 trillion in 2023, per Fed data. The jump came amid a stellar year for the stock market. The total yearly net worth of US households soared 8% to a record high of $156.2 trillion in 2023, according to data released by the Federal Reserve.”

“The change in household net worth was primarily driven by an increase in the value of directly and indirectly held corporate equity, which rose by $4.7 trillion in the fourth quarter. Meanwhile, the value of real estate on the household balance sheet fell by $0.4 trillion,” the Fed said in a statement.

Amelia has enjoyed watching basketball with me this year. We made it to one game this year.

With talk like this, contrarians often question whether the stock market is in bubble territory. From the Wall Street Journal, “Stocks are expensive, they’ve gone up a lot in a very short time and investors are excited. Not surprisingly, talk of bubbles is widespread. But many of the usual accompaniments to a bubble are missing.”

If you’re not sure what I mean by a bubble, consider this definition from the WSJ. “There’s no single definition of a market bubble, but for me it has to involve a speculative mania. It’s when buyers en masse cross the line from assessing future profit potential to buying something they know is unreasonably expensive—or just don’t care about the price at all…”

Whether the stock market is in bubble territory or not, we suggest taking steps to mitigate our risk from market downturns when we are within five years of retirement or we’re in retirement.

When accumulating assets for retirement is our number one priority, recording-setting markets probably shouldn’t cause us much trepidation, because we typically have a long time horizon before we’re going to use our funds.

Ansley recently wanted to go skiing.

In other words, big ups in the markets are great, but if we experience a big dip, we should hopefully have time to recover. When we’re in our window of time to possibly use our funds for retirement income, our strategy should shift from an accumulation stance to an income and distribution stance. We should ask the question, how can I sustainably take income and distribution from my accounts?

Everything operates better with clearly defined systems. I once heard it said that “Clarity is kindness.” A way that you can be kind to yourself is to decide beforehand how you’re going to eventually take income away from your retirement accounts.

Without a plan in place, you may resort to being a stock market timer. What I mean is if we have no plan for how we are going to take income out of our accounts and we just plan to sell some Apple shares or whatever we’re holding, we are in a way attempting to time the market. We’re hoping we’re selling at the appropriate time.

Here’s how we create a system of withdrawals. We figure together what it takes to pay your bills each year. We multiply that number times ten.

We figure whether you are planning to spend on aspirational things like a recreational vehicle or frequent trips to Europe or to see the grandkids in Montana. And we place that money in what we call our “blue bucket.” If this exercise is perplexing, we normally default to putting 40% to 50% of our investable assets in the blue bucket.

We invest in the blue bucket to be as stable as possible. In a perfect world it’s going to go up a whole lot more than it will ever go down. We draw the blue bucket down over the next ten years. This allows our red bucket that’s more aggressively invested in the market to appreciate. This also creates a safety net for us so that if a once in a generation stock market crash happens, we can be as insulated from problems as much as possible.

Until next week,

David C. Treece,

Financial Planner

864.641.7955

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Life Altering: Click here

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Clients Excel, LLC is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through Creative One Wealth. Creative One Wealth and Clients Excel, LLC are not affiliated companies. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified tax professional for guidance before making any purchasing decisions. Clients Excel, LLC is not affiliated with or endorsed by the U.S. Government or any governmental agency. Clients Excel, LLC has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. Published on 03.13.2024.