Today, after listening to Blackrock, the sole FERS TSP managing company, provide their outlook for 2019, I am convinced there is no reason to pull hairs again in 2019.
The main investment concern, according to Chairman Larry Fink, will shift from central bank policy concerning an overheating economy to geopolitical risk with BREXIT and a slowing global economy. If there are two risks that concern the chairman of the world’s largest asset manager, it would be increasing deficits worldwide, including the U.S. and the paltry retirement savings rate that baby boomers and echo boomers have going into retirement.
It was pointed out once again that time in the market is the key to successful investing. Do not let short-term swings lead to a gut- wrenching, emotional reactions. Stick to a long term game plan for ultimate success.
According to Blackrock, a $100,000 investment in the S&P 500 ten years ago (period ending 12/31/2018) would have been worth $400,000 at the end of 2018. If you missed the five best days in the market, the value drops to $265,000. If you missed the top 10 days, the values drop to $200,000 AND missing the top 25 days, means you would have just about broken even. Unbelievably, that’s out of approximately 2600 trading days over the last decade! Ironically 24 of the best 25 days happened around the same time as the 25 worst days. Talk about volatility and the principles of staying put!
Finally, Blackrock’s Chief Equity strategist, Kate Moore, said that earnings will slow and the economy will slow but she sees no recession on the horizon for 2019. All strategists agreed that it a critical lesson should have been learned in 2019 when both stock and bond markets were down and retirement accounts took a beating. All agreed that future retirees and all long- term account balances should hold some alternative investments like real estate or precious metals. For FERS participants who may not yet have access to these strategies, it may make sense to open up a pretax or post-tax Roth IRA to have access to these strategies.
If you are sitting in cash, rejoice in that you are earning some of the highest yields of the last decade right now but real rates of return (your yield minus inflation) will not get you to the promised land of retirement heaven.
My advice is to be patient and don’t pull your hair out.
For more info, contact Kevin at: 404-804-9759