3rd Quarter Investment Results and More.

If you are an investment client of Financial Planning Associates, Inc., your preliminary 3rd quarter reports have been posted to your secure web portal. During the quarter our clients’ investment accounts changed in value by an aggregate average amount of -0.70%. The portfolio with the highest return increased by +2.22% during the quarter. Final reports will replace the preliminary reports after inflation information becomes available.

Our strategy of owning a broad range of investable assets tends to result in a smoother, steadier growth curve than strategies which limit the investment categories. Recently investors owning primarily US large company stocks have experienced gains in excess of the gains experienced by broadly diversified investors. This has not always been the case, and we do not expect it to continue to be the case. We anticipate that today’s lagging categories will at some point surpass today’s leaders, and our clients will benefit. In the meantime we expect that if the current economic slowdown results in a recession our losses will be limited.

The attached table shows the 3rd quarter gains/losses experienced by investors holding some of the asset categories normally included in our client portfolios.

SCHX (US Large Cap Stocks)+0.31%
SCHF (International Large Cap Stocks)-1.21%
SCHE (Emerging Market Stocks)-5.53%
SCHA (US Small Cap Stocks)-2.92%
SCHH (US Real Estate Stocks)+6.36%
SCHO (US Short-term Treasury Bonds)+0.26%

Note: The calculation used to determine our clients’ aggregate returns is called the internal rate of return. It is cash flow specific and is net of all fees and expenses. It represents the average return experienced by our investment clients, from the most conservative to the least conservative who were invested during any portion of the period. Typically, our younger clients experience returns greater than the aggregate, and our most conservative investors may experience results that are lower. Investment return information is provided by Morningstar using GIPS standards.


Zero commission trading is here. Several discount brokers, including Charles Schwab and Company have announced their intent to lower their transaction charges to ZERO for stock and ETF trades. Welcome news. However, this may result in some investors trading more actively, which will likely reduce their return.


Labor share has been dropping. You may recall that during the past decade or so I have stated my concerns about unemployment and underemployment. Chief among the reasons for my concern is the ever increasing capabilities of new technologies. Capabilities that disrupt worker employment. The Federal Reserve Bank of San Francisco has just issued a report confirming that the portion of national income that goes to US workers has been dropping for the past 18 years. In my view this trend will likely have a moderating effect on economic growth, inflation and interest rates. The report can be accessed here.


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