Social Security: Delay Benefits at the Expense of Personal Savings?

Posted on January 22, 2015 | Financial Planning

With the exception of only the top income quintile, Social Security is the largest source of retirement income for all Americans.

While many retirees also heavily rely on their investments to provide income, they face a challenge in balancing their personal savings against Social Security benefits.

The problem is that retirees have two goals that often compete:

Obtain the highest Social Security benefits and, if married, the highest benefits for the surviving spouse. This generally entails delaying benefits, ideally to the latest possible age of 70.
Minimize savings withdrawals in the early years of retirement, particularly before 70. This generally entails taking benefits as early as possible.

However, since it is difficult for those who retire before age 70 to do both, investors should be looking for the best compromise for their situation.

Even for middle-income retirees, the outcomes can vary by hundreds of thousands of dollars. The free T. Rowe Price Social Security Benefits Evaluator tool (troweprice.com/socialsecurity) can help preretirees choose their strategy. Using that tool, a T. Rowe Price study examined some of the trade-offs involved, which depend on retirees’ marital status.

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Mixed Opinions on Rate Hike’s Effect on Stock Prices

Posted on January 22, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what impact the first rate hike by the Federal Reserve will have on stock prices. Slightly less than one out of three respondents (32%) do not expect the first increase to impact stock prices. Several of these individual investors believe the hike is or will be anticipated. About 22% of respondents expect stocks to decline immediately and then rebound or a rise to higher levels. A nearly equal number expect stock prices to fall following the rate hike announcement. A small number of respondents expect stock prices to rise (6%) or say other factors could play a role in influencing the direction of stock prices (5%).

Here is a sampling of the responses:

  • “A small drop that quickly reverses. No long-term impact.”
  • “I believe the first move will be downward, but after a few weeks, the Dow will increase.”
  • “I think it will be minor. I think [the rate hike] has been talked about enough.”
  • “Little effect if the rate hike is measured, e.g. 0.25%.”
  • “Stocks will pull back as a result of the rate hike.”


AAII Sentiment Survey: Pessimism Jumps Above 30%

Posted on January 22, 2015 | AAII Survey

The proportion of individual investors expecting stock prices to weaken topped 30% for the first time in three months. At the same time, optimism fell to its lowest level since early October.

Bullish sentiment, expectations that stock prices will rise over the next six months, plunged by 9.0 percentage points to 37.1%. Optimism was last lower on October 2, 2014 (35.4%). This is just the third time in the past 24 weeks that bullish sentiment is below its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined by 0.3 percentage points to 32.1%. This is the third consecutive week and the sixth out of the past eight with a neutral sentiment reading above the historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, spiked by 9.3 percentage points to 30.8%. This is the largest amount of pessimism recorded by our survey since October 16, 2014 (33.7%). The rise ends a streak of 13 consecutive weeks with bearish sentiment below its historical average of 30.5%.

This week’s readings signal that a reversion to the mean has occurred. Optimism has rescinded from the unusually high level registered a few weeks ago, while bearish sentiment has rebounded from an unusually low level. This shift has occurred as the S&P 500 is modestly lower for the month (down 1.3% as of yesterday’s close) following the previous record highs.

Keeping AAII members encouraged is the overall upward momentum of stock prices, falling energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are geopolitical events, the impact of falling oil prices on energy stocks, a sense that prevailing valuations for stocks are too high, the pace of economic growth and worries that an even larger decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 37.1%, down 9.0 percentage points
  • Neutral: 32.1%, down 0.3 percentage points
  • Bearish: 30.8%, up 9.3 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.

 



Sell OF THE WEEK 1/21/2015

Posted on January 21, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Apollo Education Group (APOL) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week





BUY OF THE WEEK 1/20/2015

Posted on January 20, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Global Power Equipment Group (GLPW) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week




Updating Stock Investor Pro

Posted on January 16, 2015 | Stock Investor Pro

AAII offers weekly data updates to subscribers of Stock Investor Pro. These files are typically available by Sunday morning (Central Time). This issue of Stock Investor News walks you through the process of updating your SI Pro, as well as how to make use of automatic updates. There are two methods of updating the program: using the monthly CD or using the Program/Data Install option available at AAII.com.

To update Stock Investor Pro from AAII.com, first go to the Stock Investor Pro downloads page located at: www.aaii.com/stock-investor-pro/downloads. You may be prompted to log in using either your 10-digit AAII member number, with no spaces, or your personalized username and password. If you do not remember your member number, it can be found on your Stock Investor Pro or AAII Journal mailing label. If you have saved your Login Name and Password in the past, you will not be prompted to enter this information and will be taken directly to the Stock Investor Pro Downloads area.

From the downloads area, click on the Program/Data Install button to download the weekly data update file. The full installation file is named stockinvestorinstall.exe. You may Run or Save the file, but it is highly recommended that you save the file first, preferably to your desktop. Keep in mind that the Program/Data Install file is approximately 60MB in size and is intended for download by those using high-speed Internet connections such as cable modem, DSL, T1, or T3.

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Investors’ Shifts in Investing Strategies

Posted on January 15, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how, if at all, they have recently adjusted their stock investing strategy. Three out of 10 respondents (30%) said they have not made any changes. More than 18% say they are targeting large-cap stocks, dividend paying stocks or stocks perceived as being more stable. An additional 11% said they are placing a bigger focus on valuation, with some of these individual investors seeking a combination of low valuations and dividend payments. Roughly 9% have increased their cash position.

Here is a sampling of the responses:

  • “I have not changed my focus. There is no point in trying to predict short-term moves in the market.”
  • “I am adding defensive stocks to my portfolio and reducing my exposure to those stocks that are highly volatile.”
  • “I’m selling winners to protect capital.”
  • “I will be looking for discounted value stocks.”
  • “Staying the course. I’m not smart enough to guess what the near-term impact of events on stock prices will be.”


AAII Sentiment Survey: Individual Investors Remain Optimistic

Posted on January 15, 2015 | AAII Survey

Individual investors continue to be optimistic about the short-term direction of stock prices, according to the latest AAII Sentiment Survey. Bullish sentiment rose, while bearish sentiment fell.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 5.1 percentage points to 46.1%. The rise keeps optimism above its historical average of 39.0% for the 21st time in 23 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.1 percentage points to 32.4%. The increase keeps neutral sentiment above its historical average of 30.5% for a second consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, dropped by 6.2 percentage points to 21.5%. This is the 13th consecutive week that pessimism is below its historical average of 30.5%. At current levels, bearish sentiment is near the bottom of its typical range.

Individual investors remain optimistic about the short-term direction of stock prices even with the modest decline the S&P 500 has experienced so far this month. This said, bullish sentiment remains below the unusually high levels registered two weeks ago.

Keeping AAII members encouraged is the overall upward momentum of stock prices, falling energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are geopolitical events, the impact of falling oil prices on energy stocks, a sense that prevailing valuations for other stocks are too high, the pace of economic growth and worries that an even larger decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 46.1%; up 5.1 percentage points
  • Neutral: 32.4%; up 1.1 percentage points
  • Bearish: 21.5%; down 6.2 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.



The January 2015 passing company lists and performance data is now available on-line.

Posted on January 15, 2015 | Stock Screens

YTD Return of Top Performers: Rule #1 Investing 50.3% — O’Neil’s CAN SLIM 44.1%

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January 2015 AAII MODEL PORTFOLIOS UPDATED: Small Is the New Black

Posted on January 15, 2015 | Model Portfolios

The S&P 500 index lost 0.4% in December, as large caps ended an up-and-down month on a negative note. Apparently large-cap stocks were on Santa’s naughty list last month, as small-cap stocks seemed to be favored instead. The S&P SmallCap 600 index gained 2.9% in December. Last month two new stocks were added to the Model Shadow Stock Portfolio—Global Power Equipment Group (GLPW) and L.S. Starrett Co. (SCX), which James Cloonan discusses in the January AAII Journal.

The Model Fund Portfolio saw a very modest gain in December, rising 0.2%, while the Model Shadow Stock Portfolio, which specifically invests in small-company stocks, rose 4.3% last month.

The Model Shadow Stock Portfolio’s 4.3% increase for the month beat its comparison benchmarks: The Vanguard Small Cap Index (NAESX) gained 1.3%, and the DFA US Micro Cap Index fund (DFSCX) rose 3.4%. Last year, the Model Shadow Stock Portfolio declined 5.8%, trailing the Vanguard Small Cap Index fund (up 7.4%) and the DFA US Micro Cap Index fund (up 2.9%). The Model Shadow Stock Portfolio has a compound annual return of 16.9% since its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.4% annually over the same period.

The Model Fund Portfolio’s 0.2% gain in December compares to virtually no change for the Vanguard Total Stock Market Index fund. Last year, the Model Fund Portfolio gained 9.9%, while the Vanguard Total Stock Market Index fund rose 12.4%. The Model Fund Portfolio has a compound annual return of 9.4% since inception in June of 2003, slightly underperforming the Vanguard Total Stock Market Index fund over the same time period, which returned 9.5%.

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