Berkson Asset Management’s Blog

Dear Clients and Friends:

People who are overcome by fear and panic because of a market decline will often make the mistake of liquidating their investments amid the decline.  Those who have the resilience to hold their investments regardless of fluctuations in the market will reap the benefits of a higher return over the long run as opposed to those who panic and sell during a decline.  The graphic entitled “Annual Returns and Intra-Year Declines” shows that even though the stock market (as measured by the S&P 500) is volatile and had average intra-year declines of 14.1% between 1980 and 2016, investors who held their investments despite the volatility earned an average annual return of 8.5%.  Click here to view the graphic. Read more

Dear Clients and Friends:

The topic of this blog entry might seem basic to many of you, but we do get questions from clients and prospective clients regarding how to begin accumulating wealth.  People can accumulate wealth in various ways.  Inheritance, growing a business, or saving and investment are classic ways for people to become affluent.  If there isn’t an inheritance on the horizon or you aren’t self-employed, you are left with saving and investing as your main wealth-building option.

To invest you first must save, and saving involves managing your cash flow.  Those who simply earn income and pay bills are merely surviving day to day, not managing cash flow.  The process of cash flow management involves understanding where money comes from and where it goes.

The five essential components of cash flow management include:  Read more

Dear Clients and Friends:

“Doubt is not a pleasant condition, but certainty is an absurd one.”
—Voltaire

“The market hates uncertainty” has been a common enough saying in recent years, but how logical is it? There are many different aspects to uncertainty, some that can be measured and some that cannot. Uncertainty is an unchangeable condition of existence. As individuals, we can feel more or less uncertain, but that is a distinctly human phenomenon. Rather than ebbing and flowing with investor sentiment, uncertainty is an inherent and ever-present part of investing in markets. Any investment that has an expected return above the prevailing “risk-free rate” (think T-Bills for US investors) involves trading off certainty for a potentially increased return.

Consider this concept through the lens of stock vs. bond investments. Stocks have higher expected returns than bonds largely because there is more uncertainty about the future state of the world for equity investors than bond investors. Bonds, for the most part, have fixed coupon payments and a maturity date at which principal is expected to be repaid. Read more

Dear Clients and Friends:

Have you ever wondered how much you can expect to receive in Social Security benefits?  Social Security benefits are the main source of retirement income for most people.  This week’s email features a calculator that can help estimate your Social Security benefits.  It is important to remember that this is only an estimate. Your actual benefits will vary because, in computing actual benefits, Social Security uses a more detailed record of your work and income history.  Although the calculator provides a fair estimate, it does not work well in cases where people are already retired.

Click here to access the Social Security Benefits Calculator, which can also be found under the Resources tab on our website.

How to use the tool:  Read more

Dear Clients and Friends:

As we have pointed out many times in past correspondence, market timing is not an effective investment strategy.  Investors who attempt to sell when they think the market is priced too high, and buy when they think it is too low, inevitably get it wrong and realize inferior returns when compared to low-cost, buy-and-hold strategies.

The basic reasons market timing strategies fail are 1) there are significant transaction costs related to buying and selling, 2) there are significant tax costs, and 3) odds of successfully picking the market highs and lows are extremely low.

This week’s graphic demonstrates why the odds are against market timing.  Read more

Dear Clients and Friends:

Have you considered how much of your pre-retirement income you will need to replace when you retire?  For example, if you are currently earning $50,000 per year, to maintain an equivalent lifestyle, how much will you need to draw from your savings and investments each year after you retire?  We have provided a graphic that breaks down income replacement needs based on household income.  Click here to view the graphic.

The graphic shows that income replacement needs vary widely depending on household income.  For example, Read more

Dear Clients and Friends:

For many Americans, Social Security benefits are the foundation of retirement income.  Because maximizing that stream of income is critical to funding your retirement, we thought it might be helpful if we provided a graphic that demonstrates how to maximize your Social Security benefits.  Click here to view the graphic.

As many of you may already know, you can start collecting Social Security retirement benefits as early as age 62.  However, as the graphic illustrates, the longer you postpone collecting Social Security, the greater the possible benefit. This is something to consider as you plan for your retirement.  Read more