DID YOU DOUBLE YOUR MONEY?

How has your retirement account performed over the last 5 years?

Has it doubled?  If it hasn’t, it should have come close to doubling.

If you follow the Asset Allocation approach that the industry professionals recommend, your account has only gained about 30% (not including contributions).  In the table below, I used the Vanguard 2050 Target Date fund (VFIFX) to represent the Asset Allocation approach.  Over the last 5 years, the Vanguard Target Date fund only earned an average of 5.5% per year.

Compare this to the S&P 500 which produced average annual returns of 13.9% over the same 5-year period.  If you had simply placed all your 401K investments in the S&P 500, your account would have increased by 92% (not including contributions made over the 5 years). 

Our Market Signals system generated average annual returns of 15.9% which would have more than doubled your money (+109%). 

If you began the period with a retirement account balance of $500,000 and you followed the advice of a financial advisor, you would have added about $150,000 (not including contributions).  If you simply owned the S&P 500, you would have added $460,000 (without contributions).  The investment services professionals would have cost you about $300,000 by following their bad investing strategy.  If we include contributions, the opportunity cost would be even greater.

If you had invested using my Market Signals system, your initial balance of $500,000 would have grown by 109% or by $545,000 to $1,045,000 (not including contributions).  Compared to Market Signals, the investment professionals would have cost you about $400,000.

But the investment professionals will tell you that you needed to be diversified via the Asset Allocation approach to protect your savings against the volatility of the stock market.  Let’s see how that worked out in the last bear market of 2022.

The Target Date fund lost 33% at its low point (drawdown%) in 2022.  You would have had to watch your diversified portfolio lose one third of its value – pretty painful. 

The S&P 500 by comparison had a drawdown (peak to trough) of 25%.  This is also a big loss but less than the supposedly safer diversified portfolio. 

 The other key element to consider in bear market collapses is the Time to Recover.  This measures the length of time between the pre-bear market peak to when the investment gets back to even.  Losses are much more bearable if they don’t last as long.

The S&P 500 took about 2 years to get back to even – from January 2022 to January 2024.

The “safer” Target Date fund took 3 years to get back to even having just reached the pre-drop peak in December of 2024.  So, the safer Target Date fund lost more money (33%) compared to the “riskier” S&P 500 and it took 3 years to recover compared to 2 years for the S&P 500.

My Market Signals system had the smallest drawdown at -12.5% at the October 2022 market low.  And it would have only taken one year to recover to the pre-bear peak.  You would have been back to even by January of 2023. 

Market Signals would have reduced your peak losses by 20% (from -33% to -12.5%) and you would have recovered your losses a full two years faster than the Asset Allocation method. 

The industry says that your risk of loss is greater when you seek out higher returns.  In some cases, this is true, but it isn’t always true.  In this example comparing Market Signals to the Target Date fund, Market Signals generated three times the profit while losing 62% less in the 2022 bear market and recovering those losses two years quicker. 

The industry is dead wrong.

This example shows you why I am always criticizing the investment services industry for having terrible solutions for ordinary investors.  The industry has trained you and everyone else to use this outdated and ineffective investing approach. 

Their dumb investing strategy caused me to create my Market Signals Investing System which mostly invests in the S&P 500 but rather than “ride out” the losses in bear markets, my system shifts money into safer assets during bear markets. 

Market Signals gives you the best of both worlds – large gains when the market is rising and smaller losses when the market collapses. There really is no other way to invest. 

Stop following the foolish industry strategies.  It is costing you big money.

If you currently own a mix of bonds and stocks and international stocks and small cap stocks, you are losing out on millions of dollars in retirement.  These are facts and not opinions.  It is common sense.  Bonds are a drag on your portfolio.  International stocks are a drag on your portfolio.

Stop the madness.  “Riding out” your losses in bear markets with their Buy & Hold strategy is stupid.

If your average annual returns for the last 5 years were less than 14% and you did not double your money (excluding contributions), you are doing something wrong. 

Start using Market Signals today.  Click here to learn more.  

Stay Disciplined My Friends,

Phil

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Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.