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ACTIVELY MANAGED
We are a conservative growth investment manager. Our strategies are tactical and adaptive to changing markets – using our experience as portfolio managers to build smarter portfolios
FOUNDED IN 2006
Since 2006, Riverbend Investment Management has managed financial assets for individuals, families and institutions with the view that every client relationship is a long-term partnership.
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From The Blog
What does it mean to “Sell in May and Go Away”?
Sell in May and go away — is this a worthwhile investing strategy?
One of the oldest stock market strategies is to “Sell in May and Go Away”. But what does this phrase mean? Is there any historical reason for selling stocks in May and leaving the market? What are the risks?
The Strategy
“Sell in May and go away” is a well-known trading adage that counsels investors to sell their stocks in May to avoid a seasonal decline in the stock market. An investor selling his or her stocks in May would then buy stocks again in November because the November through April period shows significantly stronger growth in the market than the other half of the year.
However, this seasonal strategy flies in the face of the buy-and-hold strategy of investors like Warren Buffett, the wildly successful “Oracle of Omaha”.
Where did this “Sell in May and go away” advice originate?
Not on Wall Street, but rather in London’s financial district. The original saying, “Sell in May and go away, come back on St. Leger’s Day” refers to a horse race.
That’s right, a horse race.
The St. Leger Stakes is one of England’s greatest horse race and is run in late September. London traders would sell their shares, enjoy their summer, and return to the market after the St. Leger race.
The idea is based on seasonality and with this strategy, traders are only invested in the stock market for about six months of the year (November through April). These months are typically the strongest period of the stock market. Investors sell their stocks in May, save their money in cash, bonds, or another safe investment, then buy stocks again in early November.
Statistics on this Strategy
As it turns […]
Set Goals as You Save & Invest
Goals give you focus.
To find and establish your investing and saving goals, first ask yourself what you want to accomplish. Do you want to build an emergency fund? Build college savings for your child? Have a large retirement fund by age 60? Once you have a defined motivation, a monetary goal can arise.
It can be easier to dedicate yourself to a goal rather than a hope or a wish. That level of dedication is important, as saving and investing usually comes with a degree of personal sacrifice. When you dedicate yourself to a saving/investing goal, some positive financial “side effects” may occur.
A goal encourages you to save consistently.
If you are saving and investing to reach a specific dollar figure, you likely also have a date for reaching it in mind. Pair a date with a saving or investing goal, and you have a time horizon, a self-imposed deadline, and you can start to see how you need to save or invest to try and achieve your goal, and what kind of savings or investments to put to work on your behalf.
You see the goal within a larger financial context.
This big-picture perspective may help you from making frivolous purchases you might later regret or taking on a big debt that might impede your progress toward reaching your target.
You see clear steps toward your goal.
Saving $1 million over a lifetime might seem daunting to the average person who has never looked at how it might be done incrementally. Once the math is in place, it might not seem so inconceivable. The intimidation of trying to reach that large number gives way to confidence – the feeling that you could realize that objective by contributing a set amount per month over a period […]
The Different Types of IRAs
This popular retirement savings vehicle comes in several varieties.
What don’t you know?
Many Americans know about Roth and traditional IRAs, but there are other types of Individual Retirement Arrangements. Here’s a quick look at all the different types of IRAs:
Traditional IRAs
(Occasionally called deductible IRAs) are the “original” IRAs. In most cases, contributions to a traditional IRA are tax deductible: they reduce your taxable income, and as a consequence, your federal income taxes. Earnings in a traditional IRA grow tax deferred until they are withdrawn, but they will be taxed upon withdrawal, and those withdrawals must begin after the IRA owner reaches age 70½. I.R.S. penalties and income taxes may apply on withdrawals taken prior to age 59½.1
Roth IRAs
Do not feature tax-deductible contributions, but they offer many potential perks for the future. Like a traditional IRA, they feature tax-deferred growth and compounding. Unlike a traditional IRA, the account contributions may be withdrawn at any time without being taxed, and the earnings may be withdrawn, tax-free, once the IRA owner is older than 59½ and has owned the IRA for at least five years. An original owner of a Roth IRA never has to make mandatory withdrawals after age 70½. In addition, a Roth IRA owner may keep contributing to the account after age 70½, so long as he or she has earned income. (A high income may prevent an individual from making Roth IRA contributions.)1,2
Some traditional IRA owners convert their traditional IRAs into Roth IRAs. Taxes need to be paid once these conversions are made.1
SIMPLE IRAs
Traditional IRAs used in a SIMPLE plan, a type of retirement plan for businesses with 100 or fewer workers. Employers and employees can make contributions to SIMPLE IRA accounts. The annual contribution limit […]
Volatility Is Not Risk
What is risk?
To the conservative investor, risk is a negative. To the opportunistic investor, risk is a factor to tolerate and accept.
Whatever the perception of risk, it should not be confused with volatility. That confusion occurs much too frequently.
Volatility can be considered a measurement of risk, but it is not risk itself.
Many investors and academics measure investment risk in terms of beta; that is, in terms of an investment’s ups and downs in relation to a market sector or the entirety of the market.
If you want to measure volatility from a very wide angle, you can examine standard deviation for the S&P 500. The total return of this broad benchmark averaged 10.1% during 1926-2015, and there was a standard deviation of 20.1 from that average total return during those 90 market years.1
What does that mean? It means that if you add or subtract 20.1 from 10.1, you get the range of total return that could be expected from the S&P two-thirds of the time during the period from 1926-2015. That is quite a variance, indicating that investors should be ready for anything when investing in equities. During 1926-2015, there was a 67% chance that the S&P could return anywhere from a 30.2% yearly gain to a 10.1% yearly loss. (Again, this is total return with dividends included.)1
Just recently, there were years in which the S&P’s total return fell outside of that wide range. In 2013, the index’s total return was +32.39%. In 2008, its total return was -37.00%.2
When statisticians measure the volatility of major indices like the S&P 500, Nasdaq Composite, or Dow Jones Industrial Average, they are measuring market risk. Trying to measure investment risk is another matter.
You can argue that investment risk is not measurable.
How can investors measure the […]
Money Habits That May Help You Become Wealthier
Financially speaking, what do some households do right?
Why do some households tread water financially while others make progress?
Does it come down to habits?
Sometimes the difference starts there. A household that prioritizes paying itself first may end up in much better financial shape in the long run than other households.
Some families see themselves as savers, others as spenders.
The spenders may enjoy affluence now, but they also may be setting themselves up for financial struggles down the road. The savers better position themselves for financial emergencies and the creation of wealth.
How does a family build up its savings?
Well, money not spent can be money saved. That should be obvious, but some households take a long time to grasp this truth. In the psychology of spenders, money unspent is money unappreciated. Less spending means less fun.
Being a saver does not mean being a miser, however.
It simply means dedicating a percentage of household income to future goals and needs rather than current wants.
You could argue that it is harder than ever for households to save consistently today; yet, it happens. As of May, U.S. households were saving 5.3% of their disposal personal income, up from 4.8% a year earlier.1
Budgeting is a great habit.
What percentage of U.S. households maintain a budget? Pollsters really ought to ask that question more often. In 2013, Gallup posed that question to Americans and found that the answer was 32%. Only 39% of households earning more than $75,000 a year bothered to budget. (Another interesting factoid from that survey: just 30% of Americans had a long-run financial plan.)2
So often, budgeting begins in response to a financial crisis. Ideally, budgeting is proactive, not reactive. Instead of being about damage control, it can be about monthly progress.
Budgeting also […]
What should be in your “final file?”
Who wants to leave this world with their financial affairs in good order?
We all do, right? None of us wants to leave a collection of financial mysteries for our spouse or our children to solve.
What we want and what we do can differ, however. Many heirs spend days, weeks, or months searching for a decedent’s financial and legal documents. They may even discover a savings bond, a certificate of deposit, or a life insurance policy years after their loved one passes.
Certainly, you want to spare your heirs from this predicament. One helpful step is to create a “final file.” Maybe it is an actual accordion or manila folder; maybe it is a file on a computer desktop; or maybe it is secured within an online vault. The form matters less than the function. The function this file will serve is to provide your heirs with the documentation and direction they need to help them settle your estate.
What should be in your “final file?”
Definitely a copy of your will and copies of any trust documents. Place a durable power of attorney and a health care proxy in there too, as this folder’s contents may need to be accessed before you die.
Copies of insurance policies should go into the “final file” – not only your life insurance policy, but home and auto coverage. A list of all the financial accounts in your name should be kept in the file – and, to be complete, why not include sample account statements with account numbers, or, at least, usernames and passwords, so that these accounts can be easily accessed online.
Social Security benefit information should also be compiled. That information will be essential for your spouse (and, perhaps, for a former spouse). If you happen to […]
Avoiding the Cybercrooks
How can you protect yourself against ransomware, phishing, and other tactics?
Imagine finding out that your computer has been hacked. The hackers leave you a message: if you want your data back, you must pay them $300 in bitcoin. This was what happened to hundreds of thousands of PC users in May 2017 when they were attacked by the WannaCry malware, which exploited security flaws in Windows.
How can you plan to avoid cyberattacks and other attempts to take your money over the Internet? Be wary, and if attacked, respond quickly.
Phishing
This is when a cybercriminal throws you a hook, line, and sinker in the form of a fake, but convincing, email from a bank, law enforcement agency, or corporation, complete with accurate logos and graphics. The goal is to get you to disclose your personal information – the crooks will either use it or sell it. The best way to avoid phishing emails: stick to a virtual private network (VPN) or extremely reliable Wi-Fi networks when you are online.1
Ransomware
In this scam, online thieves create a mock virus, with an announcement that freezes your monitor. Their message: your files have been kidnapped, and you will need a decryption key to get them back, which you will pay handsomely to receive. In 2016, the FBI fielded 2,673 ransomware attack complaints, by companies and individuals who lost a total of $2.4 million. How can you avoid joining their ranks? Keep your security software and operating system as state of the art as you can. Your anti-virus programs should have the latest set of virus definitions. Your Internet browser and its plug-ins should also be up to date.2
Advance fee scams
A crook contacts you via text message or email, posing as a charity, a handyman, an adult […]
5 Tips to Help You Catch Up On Your Retirement Savings
Do you fear you are saving for retirement too late?
Plan to address that anxiety with some positive financial moves. If you have little saved for retirement at age 50 (or thereabouts), there is still much you can do to generate a fund for your future and to sustain your retirement prospects.
Contribute and play catch-up.
This year’s standard contribution limit for an IRA (Roth or traditional) is $5,500; common employer-sponsored retirement plans have a 2018 contribution limit of $18,500. You should try, if at all possible, to meet those limits.
In fact, starting in the year you turn 50, you have a chance to contribute even more: for you, the ceiling for annual IRA contributions is $6,500; the limit on yearly contributions to workplace retirement plans, $24,500.1
Focus on determining the retirement income you will need.
If you are behind on saving, you may be tempted to place your money into extremely risky and speculative investments – anything to make up for lost time.
That may not work out well.
Rather than risk big losses you have little time to recover from, save reasonably and talk to a financial professional about income investing. What investments could potentially produce recurring income to supplement your Social Security payments?
Consider where you could retire cheaply.
When your retirement savings are less than you would prefer, this implies a compromise. Not necessarily a compromise of your dreams, but of your lifestyle. There are many areas of the country and the world that may allow you to retire with less financial pressure.
Think about retiring later.
Every additional year you work is one less year of retirement to fund. Each year you refrain from drawing down your retirement accounts, you give them another year of potential growth and compounding – and compounding becomes more significant as those […]
The Major Retirement Planning Mistakes
Why are they made again and again?
Much has been written about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Aside from these blunders, there are also some classic financial missteps that plague retirees.
Calling them “mistakes” may be a bit harsh, as not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we plan for and enter retirement.
Leaving work too early. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for greater retirement income. Filing for your monthly benefits before you reach Social Security’s Full Retirement Age (FRA) can mean comparatively smaller monthly payments. The FRA varies from 66-67 for people born between 1943-59. For those born in 1960 and later, the FRA is 67.1,2
Some of us are forced to make this “mistake.” The Center for Retirement Research at Boston College says 56% of men and 64% of women apply for Social Security before full retirement age. Still, if you can delay claiming Social Security, that positions you for greater monthly benefits.1
Underestimating medical bills. In its latest estimate of retiree health care costs, Fidelity Investments says that a couple retiring at 65 will need $275,000 to pay for future health care costs. That estimate may be conservative, as Fidelity’s calculation does not include eye care, dental care, or long-term care expenses.3
Taking the potential for longevity too lightly. Actuaries at the Social Security Administration project that around a fourth of today’s 65-year-olds will live to age 90, with about one in ten living 95 years or longer. The prospect of a 20- or 30-year retirement is […]