We’re gaining on inflation!
Two months into third quarter of 2017 our investors’ portfolios have gained 2.30%. The aggregate annualized return for our investors during the past 5 years has been +5.29%. Inflation during the past 5 years has averaged 1.25%. Thus, our investors’ portfolios, generally have returned more than 4 times the rate of inflation.
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 more conservative investors experience results that are lower. Investment return information is provided by Morningstar using GIPS standards.
In modeling cash flows we typically assume that investment returns during retirement will average about twice the rate of general inflation. Therefore, the experience of our retired clients during the past 5 years has been better than expected in this regard. Of course, specific results will vary based on many factors. Our clients can consider their investment results and cash flow “pictures” with us during their individual reviews.
The suffering of the fiduciary rule.
We have reported before (see blog entries on November 2, 2015 and March 29, 2016) about the Department of Labor’s proposed fiduciary requirement for providers of financial advice. The fiduciary relationship requires the highest level of fidelity and accountability, as opposed to the suitability standard currently required of stock brokers and insurance agents, generally. In the interest of protecting consumers the Department of Labor issued a ruling that essentially all providers of financial advice adhere to a fiduciary standard. Certain established financial institutions opposed the ruling. As reported in FinancialPlanning recently, the current administration intends to nix a key enforcement provision of the DOL’s rule. Our clients are unaffected by this rule, with or without enforcement. We are fiduciaries. Proudly. We are interested in our clients’ success, not sales commissions. Our income comes directly from our clients, and only from our clients.
Our website, fpai.net blocks access from other countries.
Note to clients traveling outside the United States: In an effort to limit possible “interference” from malicious cyber vandals we have blocked access to our website when initiated from another country.
More KBS tender offers.
Many of our clients own interests in KBS real estate investment trusts. Recently, again, tender offers have been made to purchase shares at substantial discounts to the REITs’ board of directors estimated values. We recommend that you do NOT tender your shares.
Some stock analysts consider Apple to be a core holding.