There is a lot going on and I wanted to provide you some updates.
We Have Moved Our Home Office
After seven years in the Roller House, Kim and I have decided to move our home office to Parker Rd and the North Dallas Tollway. We made some special memories in East Plano along with some great friends, but it is time to downsize and spend less energy maintaining our house. Our new address is:
5809 Cardigan Dr.
Plano, TX 75093
I have also decided to cancel my office line and only use 214-215-2348. Kim can still be reached at 214-587-7885.
As you’ve probably heard, TD Ameritrade is being acquired by Charles Schwab. Change is a part of life. I started banking with Community Credit Union when I moved to Dallas. First, they converted to a Bank. Then they were acquired by LegacyTexas Bank, and now Prosperity Bank has bought them. Consider how many firms Wells Fargo, JPMorgan Chase, and Bank of America have gobbled up.
Independent Registered Investment Advisors (RIA), like Domestique Capital, have to hold their clients’ money at a custodian. I chose TD Ameritrade because I liked their open-architecture, technology, and service. While I like TD Ameritrade and plan to keep clients’ money there if this merger doesn’t go through, Schwab is also a very good place to hold investments.
If the merger does go through, my current plan is to move all of your accounts to Schwab and use them as my primary custodian. The combined firm will have about 24 million client accounts and hold over $5 Trillion in clients’ money. I am hopeful that the new company will have the scale to continue to provide great service and create world-class technology.
It will likely be a year from now when your assets get moved to Schwab. I am hearing that there will not be any paperwork to sign! I will keep you informed as more information comes out. Fun Fact: Schwab’s headquarters is in Westlake, TX about five miles away from an 1,800 employee TD Ameritrade operations office in Southlake.
What a week we are having. I have been reading about the Corona Virus for a few months and have been perplexed how U.S. stocks didn’t care at all until Sunday night. A few weeks ago, I watched the Pandemics episode of explained (2.1) on Netflix. I was really impressed how right they were when it came out. They even mentioned bats and wet markets (something I had never heard of until reading about Corona).
I love showing clients a chart of the last 38 years of stock market returns for the S&P 500. It shows the annual returns next to the the intra-year drops. From 1980 through 2017, the average intra-year drop for the S&P 500 was 13.8% while the S&P 500 while the S&P 500 had a positive annual return in 29 of the 38 years.
Even though I am constantly reminding clients to expect their stocks to drop 13% every year because that is what stocks do, it is always terrifying to actually watch them drop. It is said, the stock market takes the stairs up and the elevator down. The S&P 500 dropped 4.42% today after two negative 3% days. U.S. stocks rarely go up like that.
We got our 13% drop fast this year! As tempting as it is to want to cut your losses or stop the bleeding, the reality is that markets could bottom tomorrow or go down much further. Corona is just the apocalypse du jour. There is always something to worry about. Remember the debt ceiling of late 2012, the flash crash of 2010, and the Euro crisis of 2011? I think the Corona virus is likely to die off like SARS, Swine-Flue, or Zika, but it could be like the 1347-1351 Black Death that killed 30% to 60% of the world’s population. Nobody knows what is going to happen.
Market timing is a fool’s errand. Take the time to read this excellent piece that Nick Maggiulli wrote in January. One of the worst things you can do right now is log into your investments several times a day and calculate how much less you are worth since the S&P 500 hit an all-time high just six days ago. It helps me to go to websites like Morningstar.com and see that my safe bond fund is up over 2% and my gold is up over 7% this year. I know if I have an emergency, I can sell these investments without being a forced seller of stocks. I am glad I own a diversified portfolio that was built to survive the many bear markets that I am likely to see the rest of my life.
Taking Advantage of Corona
With people panicking out of stocks, they have bid the 10-year U.S. treasury bond yield down to an insanely low 1.3%. That means that now is an excellent time to consider refinancing a mortgage. Let me know if you want help determining if this is the right move for you.
It is also a great time to consider converting part of an IRA to a Roth IRA. While stocks could go much lower, the ideal time to convert is when stocks are cheap.
People who are still saving should take advantage of the drop by continuing to dollar cost average into their 401(k) or other retirement plans. If stocks keep dropping, they will be able to buy more each paycheck. Many people still need to make their 2019 IRA contributions before April 15th. Those investors can buy U.S. stocks at September of 2018 prices! It is like having a time machine.
Lastly, use this time to embrace uncertainty and learn from your trials. No Wall Street analyst predicted that people eating bat soup in a Chinese wet market were going to cause a global epidemic in their What to Expect for 2020 Report. Likewise, nobody thought in March of 2009 that U.S. stocks were going to rise this high for this long. Weather, the economy, politics, and stock markets are all unpredictable. This week isn’t unique. Remember the polling numbers the day before the last Presidential Election? It is freeing to realize that we live in an unpredictable world. Live your life and focus on what you can control.
Times like these are scary and I am here to help. If there is anything I can do for you, click the link in my footer and schedule a call.