In true Tortoise and the Hare like fashion from the old school fable …..
There’s a tug-of-war that goes on between the turtle and the hare…..
We all know the ending, although some endings have changed over the years, but stay with us for just a second, as we bring a financial parallel to our fable.
In our interesting story, bonds are the Tortoise and the Hare are Equities/stocks.
Why most need Tortoise/Bonds in their portfolios
Bonds are truly like the Tortoise as they’re more slow running, BUT also importantly, slow to lose value.
Equities/stocks carry Hare like returns that generally, over the longer term are faster, but in true Hare like fashion, can get really sidetracked at times (think October – December of 2018 Amateur hour time.)
Here is the Great News in our Story – You can do both!
The good news about investing, unlike the fable is that you don’t just have to be one or the other, but you can mix.
We would argue that mature (larger or for more mature folks) portfolios need a Tortoise for stability during bad times as well as the yummy income that bonds produce!
As the portfolio grows or the income needs rise, more Tortoise may be needed.
Early portfolios that have heavy contributions can frequently be all Hare/Equities/Stocks as the contributions making up a great percentage of the portfolio act like a stabilizing Tortoise.
Normal progressions may be 75% Hare, then 50% then 40% and 25% or less Hare are frequently ok …. with the remaining portions being Tortoise of course….
One of our favorites are 50/50 Hare to Tortoise ….
Another great part of having both in a portfolio is they tend to offset themselves naturally during bad times – when Hare/Equity/Stocks get smacked, almost inevitably Tortoise/Bonds have a field day – multiple reasons such as interest rates dropping when Equities rise and visa versa, as well as a Tortoise safe haven…
There are always unique situations such as all Tortoise due to immediate need or just dislike of volatility and all Hare when there are no needs for the future.
Look for a greater depth information in our coming Newsletter with possible follow up items and details here.
Needless to say we are fond of both the Hare and Tortoise.
Thanks for accommodating our juvenile humor!
Have a Great “Tortoise and the Hare” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
Q 4 2018 Newsletter Video Audio Podcast Review By John Kvale
Welcome to our Video and Audio Podcast Review of our Q 4 2018 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.
Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page
November 17th – Saturday before Thanksgiving – Dallas Athletic Club from 3-5 pm
Let’s get going!
Q 4 2018 Newsletter
And here is your review!
Capital Market Talk
Earnings and Markets Eventually Converge
In this hugely in depth article, first we discuss the effect of earnings eventually driving capital markets, but disconnects can occur. It can even be a good thing for Capital Markets to WAY underperform earnings, as they are this year because in brings valuations back in line.
Here is the key graph
Higher Rates, a Short Term Headwind, Eventually a Tailwind
With sustained lower rates over the last decade, memories have faded on the tugging headwinds that higher rates have – IN THE SHORT TERM – on the mandatory safety asset class of bonds.
Higher rates are a great thing as Bonds/Fixed Income Assets have a place for almost all investors due to their safety and liquidity.
Once the headwinds subside our fixed income investments will have ridden the yield curve higher and begin paying more income in the form of yield – into our pockets – Finally!
Too High of Rates Can Create Trouble
Too high of rates or an overshoot CAN create trouble … or a recession…
Our friends at JPMorgan – historically show that rate is about 5% – yea FIVE percent –
We disagree and think a lower level may now be this tipping point, due to the decade low interest rate level we have just experienced-
Current at two percent, we have a long way to go before getting too antsy
Inverted Yield Curve Update
So far to good- no inversion yet!
Financial Planning
This series of articles came out of no where and in like domino fashion, once one was done the next took form and fell into place-
App of the Quarter – Hardware
Our editor took the fancy picture out due to copyright fears, but our experience with the Firestick has been exceptional – Here are the highlights of our findings
Enjoy the fall –
See Ya next Year – Wow 2019 here we come!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com
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