Wealth Management Questions with Bill Richardson Part 9

Three Questions for Bill Richardson Part 9

Question 1: September seems to be off to a rocky start.  Is this the beginning of a much larger decline?

According to Investopedia “Since 1950, the month of September has seen an average decline in the Dow Jones Industrial Average (DJIA) of 0.8%, while the S&P 500 has averaged a 0.5% decline during September. Since the Nasdaq was first established in 1971, its composite index has fallen an average of 0.5% during September trading. (source: https://www.investopedia.com/ask/answers/06/septworstmonth.asp)

Yardeni.com reports that between 1928 and 2020, there have been 42 positive September’s and 49 negative Septembers. (source: https://www.yardeni.com/pub/stmktreturns.pdf

Usually, we get this question about October but Investopedia reports that it is 54 positive months and 38 negative months but some of the bad ones, like 1987, took place in October.

As I write this response on September 17th, the S&P 500 is down 6.05% for the month but over the past six months, according to YCharts, is up 40% but year-to-date, it is up 4.6% and over the past year, it is up 12%. 

In a perfect world, we’d always sell at the highs and buy back in at the lows but that isn’t simple.  Here’s the bottom line.  Although many clients expect their advisors to predict the future, that isn’t possible.  Smart investors focus on macro, longer-term trends.  That isn’t to say “market trends” but more on industry trends as major indices, like the S&P 500”, are too broad to really benefit from trends.  For the past 10 years or so, two major sectors have been strong – technology and healthcare.  The technology trend is here to stay and healthcare is strong based on providing solutions for the aging Baby Boomer generation.  Real Estate has been strong as there are 88 million Millennials in the US (according to demographer Kenneth Gronbach) and they need a place to live. 

So although we might think there will be weakness in the markets and strong sectors like technology have had a pullback and September or October often are bad months for financial markets, we can’t predict the future and “the trend is our friend” so we are being defensive but not ready to run and hide.


Question 2: When I read my statements, I notice that on the right-hand column of my online statement, it shows the unrealized gains of the investments I hold. While there are some very sizable return numbers for many of my stocks and mutual funds, I’m not seeing much of a gain in that column for my Rockridge Private Debt investment?

The column on the right only represents the unrealized gain or capital gain on your investment. There are basically 3 types of gains you can make…interest, dividends, and capital gains. The first two are examples of realized gains so they don’t show up in the unrealized gain column, but do get added back into your portfolio.

As Rockridge is lower risk and earns mostly interest, it may not seem like it’s doing much if you are simply looking at the unrealized gain column. That said, the fund has done a great job in the lower risk category as you will see by the attached report…earning in the 6% range very consistently. 

Another example of this would be a company that pays dividends, like Royal Bank. Only the price change of the stock will show up on the right column while the 4+% dividend that Royal Bank pays each year, and you received in your portfolio, is a realized gain so would not be reflected in that column.


Question 3: How often should I update my will?

This is a topic that I could write pages about.  The simple answer is that it should be reviewed about every three years and updated whenever you have major life changes.  There are many things to think about with a will, such as do you have the right executor and does your executor understand his or her responsibilities and have the capabilities to execute it upon your death. 

The problem is that none of us like to think about death and therefore push such things to the back burner.  To help you with this, change your viewpoint from yourself to your family.  While they are grieving your death, they also have to make funeral arrangements and then they have to deal with your estate.  If you have your affairs in order, it will significantly reduce stress levels and financial costs.


A good rule of thumb for estate and will planning is “think outside the box”.

Until next time, have a great day!