The Conundrum Of Drawing Funds Down In Retirement, And Much More
For many people, the transition from working and saving, to “retirement” and spending, can be a difficult adjustment. Mentally, the vision of a diminishing balance sheet can wreak havoc with one’s thought processes. No one wants to run out of money.
Yet, the variables are many, and quite often, uncertain. How long will you live? What about your spouse? How much do you need to spend? Do you want to leave a legacy for children? What are the probable outcomes for markets? How much in the way of resources do you have (liquid assets, pensions, Social Security, other sources of income)? And, importantly, how do you deal with downside volatility and what I call short-termism?
Like the movie with Meryl Streep and Alec Baldwin about a divorced couple who remain good friends, It’s Complicated! We’ll attempt to address many of these issues in this piece.
We’ll also take a look back at 2018 and TABR’s various strategies, but we’ll first have an update on financial markets and our current thinking. Much has changed in the past five weeks, thanks to the Federal Reserve Board. It’s a great example of why flexibility is paramount in investing, along with filtering out the noise and opinions.
What’s Changed Since December 24
As of the close on Christmas Eve, the S&P 500 Index had declined -19.76% from its September peak, while the EFA Index (Europe, Far East, Australia) was off -24.3% (a January peak), and the Russell 2000 Index of small companies was down -27.2% (August peak).
In our December 29 update, we’d mentioned that because breadth and momentum had confirmed the new price lows, it was “highly probable that in the coming weeks, prices are going lower, and perhaps, much lower.” In market history, what are described as “V” bottoms are pretty rare, hence, the probabilities. Yet, here just five weeks later, it is appearing more and more that indeed, we may have just witnessed a “V” bottom. This is almost entirely due to the Federal Reserve Board.
Since December 24, the S&P 500 has rallied 15%, with the EFA up a more pedestrian 10%, while the Russell 2000 has rebounded over +18%. The indexes have recovered most of what they had lost in December. A number of technical accomplishments have taken place, which historically are mostly bullish, yet, there is no guarantee that this is anything more than a strong, bear market rally.
What’s changed is that since mid-December, the tone and actions of the Fed and its chairman, Jerome Powell, have gone from tightening and restrictive, to “patient, data dependent,” and what I would consider to be accommodative. What we’ve seen is that the stock market can’t take interest rates at the 3.20% level on the 10-year Treasury Yield. With the stock market falling apart in the fourth quarter, it appears the Fed began to recognize what their policies were doing to financial markets. And, correspondingly, the financial markets’ effect on the economy.
As Gluskin Sheff chief strategist David Rosenberg wrote last week, “Never before has the economy been so hitched to asset inflation for its success.” This is problematic, as markets cannot just go up. If they did, the upside would become quite limited, and capital markets would cease to function normally. Yet, the Fed by its actions of the past 10 years, have created a dichotomy, and we don’t know how the story is going to end.
By taking interest rates to zero and leaving them there for several years, the Fed encouraged risk taking and the creation of debt that now dwarfs what was outstanding in 2007. So, if there is $4 trillion of debt today, and the Fed raises interest rates by 1%, they’ve just created about $400 billion of extra interest payments (assuming variable rates) that ordinarily would be going into the economy. See the conflict? This is one of the reasons President Trump was so critical of Powell in December. He knows that if the Fed keeps raising rates, debt service is going to go through the roof, and eventually cause a recession.
But, who says recessions should be outlawed? The avoidance and delaying of necessary pain may just cause something much worse down the road. There is no static length to the business cycle, but it can be much like a rubber band. The longer you try to elongate it, the worse the consequences will be when it snaps. For investing, though, it is always wise to remember the adages of the late Marty Zweig, the famous money manager and newsletter writer/quant. I believe he coined the sayings of “Don’t Fight The Tape” and “Don’t Fight The Fed.”
We’ve purposely included these axioms in the various risk models we use to allocate stock market exposure, and needless to say, they’ve improved considerably since late December as a result of the tape action.
Portfolio Allocations
On December 26 and again on January 4, there were extremely strong market days in which the number of advancing stocks swamped those of declining issues (great breadth), along with that of significant ratios of upside volume to down volume. Typically measured over 10 days, this type of market action generates what are known as breadth thrusts, which historically have tended to be quite bullish. Several research services we subscribe to, including Ned Davis Research, Lowry’s Reports and The Chartist Mutual Fund Letter, all noted this in early January.
Though the services can compute these data points a bit differently, one variation is when the 10-day moving average of advancing stocks versus declining stocks exceeds 2 to 1 or more. According to The Chartist Mutual Fund Letter, there have been only 14 prior signals since 1949. The data below is courtesy of their newsletter.
| Signal Date | Dow % Change 3 mos | % Change 6 months | % Change 12 months |
| 07/13/1949 | 7.9 | 13.6 | 14.0 |
| 11/20/1950 | 8.5 | 8.0 | 12.0 |
| 01/25/1954 | 7.9 | 18.3 | 36.7 |
| 07/11/1962 | -0.4 | 14.6 | 20.5 |
| 01/16/1967 | 4.0 | 5.9 | 5.1 |
| 12/04/1970 | 10.1 | 13.0 | 4.9 |
| 01/10/1975 | 18.6 | 32.4 | 40.0 |
| 01/06/1976 | 10.5 | 10.7 | 12.3 |
| 08/23/1982 | 11.3 | 23.1 | 33.9 |
| 01/14/1987 | 10.7 | 21.9 | -5.8 |
| 02/05/1991 | 5.5 | 7.2 | 16.8 |
| 03/23/2009 | 7.0 | 25.4 | 40.0 |
| 07/12/2016 | -1.1 | 8.4 | 17.4 |
| 01/09/2019 | ? | ? | ? |
| Average | 7.2 | 15.2 | 20.0 |
As you can see, there have been no negative outcomes after six months, and only one loss after one year, with the gains considerably above average. If the prior averages were to hold up, the S&P 500 would be at an all-time high in July. Given that the Fed now seems to be on the accommodative side, anything is possible.
On December 3, the equity allocation within our tactical portfolios was at 50%, and it now stands at 56%. You might conclude that little has changed. That’s hardly the case. On December 19, we moved to 25%, and then to 100% cash on January 2. In the past four weeks, 4 of our 7 models have flipped back to positive. In addition, our risk model for corporate high yield bonds flashed a BUY signal on January 11, reversing the SELL from late October, so we made a big shift out of short duration bond funds. At present, I consider our positioning to be moderately positive, or high neutral.
However, we can’t know if stocks are going back up to new highs first, or if, as last month’s comments implied, this rally is going to rollover and take out the December lows. The rally, though strong, has retraced almost an exact 62% of the decline in the S&P 500. That’s very common in bear market rallies. In addition, almost all major indexes have yet to penetrate to the upside their declining 200-day moving averages, which are several percentage points above current levels (except for the Dow Jones Industrials).
Besides the breadth and momentum thrusts, though, there is an additional piece of evidence that usually bodes well for a positive outcome. This past week, the S&P 500’s advance/decline line (see below, courtesy of www.stockcharts.com) has made a new high, eclipsing its high of September.
This is typically a leading indicator, with fairly rare divergences (much like the V bottom analogy I noted at the December lows), so it is suggesting that new price highs will follow in the days and months ahead. But, nothing is perfect. The last two months have illustrated the importance of having a flexible approach that adapts to the evidence as it changes. If you think you know where markets are headed this year, or any year for that matter, I’d respectfully suggest you think again. Success in the stock market comes from adjusting your strategy to the current reality, not from guessing the future.
Drawing Funds Down In Retirement
In finance, and during the accumulation phase of an investor’s lifetime, we are taught that the order of returns does not matter. When portfolio withdrawals are introduced to the equation, though, such as in “retirement,” the order of returns becomes a large factor in whether or not your money lasts longer than you do. This is called “sequence risk,” and it is most pronounced just before and after retirement.
When you couple large losses in the early years of retirement with the normal course of regular income draws that need to happen regardless (one has to live!), it creates a situation mathematically that is extremely difficult to overcome, and increases the chance of “portfolio failure.”
Before we dive further into sequence risk, though, I first want to tackle a related topic, which relates strictly to IRA accounts, but is directly tied to the concept of portfolio withdrawal rates. As you know, when an investor turns 70 1/2, they must begin to take draws each year out of their IRA accounts, using an IRS formula based on your age. This process is called the RMD, or required minimum distribution.
At TABR, we now have over 80 clients in this category. Usually for tax reasons, but also because not everyone will need the funds (but many clients do), a number of clients only take the minimum out each year. And, over the years, we’ve often heard this refrain—“hey, I just want to earn my RMD.” In other words, I don’t want to see my principal go down over time.
Without further ado, let me show you how unrealistic that thinking is. Below is the Uniform Distribution Table used by IRA owners to calculate lifetime distributions unless their beneficiary is a spouse who is more than 10 years younger than them. To compute one’s minimum payout each year, you take the value of your IRA account (s) on December 31, and then divide that sum by the Life Expectancy Factor.
To make my point, I’m basing the withdrawal rate on a constant $500,000 balance. In the columns on the far right, you’ll see the dollar amount that has to be distributed each year, and the rate of return necessary to earn that return.
| Age of IRA Owner | Life Expectancy (in years) | Distribution in $$ | Rate of Return Needed |
| 70 | 27.4 | $18,248 | 3.64% |
| 71 | 26.5 | $18,867 | 3.77 |
| 72 | 25.6 | $19,531 | 3.90 |
| 73 | 24.7 | $20,242 | 4.04 |
| 74 | 23.8 | $21,008 | 4.20 |
| 75 | 22.9 | $21,834 | 4.36 |
| 76 | 22.0 | $22,727 | 4.54 |
| 77 | 21.2 | $23,584 | 4.71 |
| 78 | 20.3 | $24,630 | 4.92 |
| 79 | 19.5 | $25,641 | 5.12 |
| 80 | 18.7 | $26,737 | 5.34 |
| 81 | 17.9 | $27,932 | 5.58 |
| 82 | 17.1 | $29,239 | 5.84 |
| 83 | 16.3 | $30,674 | 6.13 |
| 84 | 15.5 | $32,258 | 6.45 |
| 85 | 14.8 | $33,783 | 6.75 |
In most environments, the “hurdle” to earn the RMD in the early years is fairly low (unless one is in all bonds with Fed Funds at 0% like from 2009 to 2015). By age 85, though, you’d need to earn almost 7% to stay even. And, of course, the number keeps growing, should you live that long. But to earn 6% or more over time, one would likely need to be heavily allocated to stocks, if not entirely. Can you handle losing -30% to -50% of your capital when you’re in your 80s? Most investors we know can’t, so diversification and risk management is a must.
For IRA owners, my message is this. Unless you can deal with an all-stock portfolio, come to grips with the fact the balance in your account is likely going to go down over time.
Sequence Risk
As mentioned above, when one is saving and not taking any money out of an account, the ending value over a defined period of time does not change (assuming the same average return) because of the path of the returns. But, once you introduce portfolio withdrawals, everything changes. I should note that a compound annual return is not the same as an average annual return. That is a whole different topic.
In his article “Solving the Dilemma of Long-Term Investing,” author Ben Warwick cited a hypothetical experiment created by Ron Surz of Target Date Solutions to best illustrate the importance of return sequence risk.
Surz assumed that you start with a $1 million portfolio, all invested in the S&P 500, and take a 5% draw rate every year, or $50,000. He then took the actual returns of the index from 1989 to 2008, and showed the results in chronological order as they actually occurred, then compared that with what happened if you simply flipped the order in the second sequence, plotting them in reverse.
In the table below, you can see the stark differences in the two outcomes, both of which sport an average annual return for the index of 10.4%.
The sequence on the left had an ending value of over $3.42 million, even after suffering a $2 million portfolio loss in 2008. The sequence on the right ended at $799,000, a difference of over $2.6 million. The so-called “retiree” started at a great time, beginning to take draws in 1989, in hindsight the start of a great 11-year run. In contrast, the “retiree” on the right started at a terrible time, the inception of a period where the S&P 500 lost money on a compounded basis for over 10 years.
There’s an adage in sports you may have heard. I’m sure many coaches in history continue to repeat this mantra today. “It’s not how you start. It’s how you finish.” To be fair, there is some truth to that, as teams never want to give up hope when they get behind early, either in a game, or a season. But, the data is stacked against you, even in sports. Studies have been done on major league baseball, college baseball and the National Hockey League. Covering thousands of games, here is what the research shows. The team that scores FIRST, wins the game about 67% of the time.
Getting off to a good start is just as important in sports as it is in “retirement.” It really matters when you start, and where you start from. In analyzing those questions today, here’s some context. For the 10 years ended December 2009, the S&P Index had an annualized compound LOSS of -2.7% per year (without dividends). Since then, the index has gained 9.4% compounded for the past 9 years (again, without dividends).
Can stocks continue at a near 10% pace for another 7-10 years, as they did from 1990 to 1999? Anything is possible, but historical stock market valuations argue against that outcome. No one has a clear crystal ball. We are leaning towards low single digits, with a lot more down volatility.
Short-Termism, Best Outcomes, And What’s Right For You
It’s clear from history that an all-stock portfolio will generate the largest gains over time. So, why don’t more investors (and advisors, for that matter), opt for this approach? That’s likely because the medicine necessary to get the end results (at least with buying and holding) is too toxic for the vast majority of people. Dealing with losing on paper some -30% to -55% of one’s portfolio is not compatible with the human psyche of most individuals.
Thankfully, at least since about 1970, using a more balanced portfolio of 60% stock and 40% bonds, or even a 50/50 mix, has provided investors with most of the gains of the stock market, with a large reduction in downside volatility. We continue to think that will be the case going forward, but the challenge is much greater today than in 1970 or the 1980s, as interest rates are quite low by historical standards and stock market valuations are quite high.
Today, we serve more retired clients than we did 10 years ago. Then, I was 51, and now I’m 61. As Steve Medland and I routinely discuss with clients the probabilities of 20 or 30-year retirements as clients reach their 60s and 70s, I think the most challenging thing we come across is what is called Short-Termism. That’s defined as an excessive focus on short-term results at the expense of long-term interests.
I’ll give you an example. For many in their 70s, long-term is next year, despite the fact the data suggest they’ll likely live another 15 years. Satisfying those two goals is incompatible. Guessing or opining about the next year, and altering one’s strategy to “fit your feelings” is a recipe for disaster. On average, stocks decline once every four years, and in two of the past four calendar years, diversified portfolios have lost money. The level of losses has been minor, and the vast majority of our clients are on a good path in retirement.
What I’ve learned, though, is that we can talk about “data” all we want, but “peace of mind” means different things to different people. Understanding what that means to each client is vitally important. If you’re reading this letter, you already should know that risk management is a huge part of TABR’s process. Minimizing losses is achievable, sometimes at the expense of higher returns, but eliminating losses is mostly impossible, unless one moves to certain strategies within fixed income. But, everything we do has a consequence. As long as investors understand what those consequences are, “peace of mind” is achievable.
Looking Back at 2018
We’ve always found it useful to look backwards and contemplate what we’ve done. This can be helpful even when things seem to be going right, but even more so when they’re not. It’s how one can make course corrections, and fix things.
Transparency has been a fixture at TABR since we were founded in 2004. The vast majority of RIAs in our business do not publish a track record. They may cite compliance issues, or the work necessary to comply with regulations, or that all their clients have “customized” portfolios. Simply put, we do publish one, because we believe in our process, and our staff backs that up by investing the vast majority of their personal savings in the exact same strategies we use for clients.
Sometimes, the numbers aren’t pretty. That is part of being in investment management. Even the best money managers in the business go through years of underperformance. We are no different. The key is, in our view, sticking with your discipline, but also having the courage to fix things when something may be amiss.
And though below you will see comparisons to industry benchmarks, ultimately we are judged by helping our clients achieve their goals, with substantially less risk than passive, buy and hold strategies. Besides our combined 51 years of financial planning and investment management wisdom, that is probably the one big difference and edge we have over competitors.
There wasn’t much to write home about for financial markets in 2018. Though at TABR we stick with simple stocks and bonds (with the exception of real estate in our passive portfolio), a tally of 10 asset classes which includes domestic and international stocks, investment grade, high yield and government bonds, along with gold, commodities and real estate, showed that only 2 of 10 asset classes had positive returns in 2018. Those “positive” returns were less than 1%. The 20% positive rate for asset classes was the lowest since the beginning of the dataset in 1971. Cash was actually the best asset class in 2018, but it is not part of the subset.
Stock Allocations
Our tactical equity allocations began the year 100% invested, carrying over the strength from 2017. That didn’t last, and by April 3, 4 of our 8 risk models were negative, with exposure down to 50%. From April 3 to early December, allocations were 50% or less, then dropped 25% on December 19 and 13% on December 24.
As you can see, tactical is just that. There are changes to exposure, when conditions change. There’s no bias to up or down, bullish or bearish. It’s more like, what is, is. There was very little turnover in our relative strength selections, with just one change taking place the entire year. Had we been fully invested the whole year in the four top-ranked ETFs which we evaluate monthly, we estimate the return would have been -7.00% for the year. This actually beat our benchmark, which for stocks is 75% Vanguard Total Stock and 25% Vanguard Total International Stock. That combination came in at -7.55%.
There was a small edge, but momentum took a beating in the fourth quarter. As it turned out, how much you owned, especially in the 4th quarter when the S&P 500 fell over -14%, was more important than what you owned. On average, our equity allocations for the entire year came in at 55%.
Though we can never guarantee results, a look at what happened to our various portfolios in December, when the Vanguard S&P 500 Fund (VFINX) fell -9.03%, is a real example of how we hope our risk models will continue to mitigate downside risk.
Vanguard S&P 500 Fund -9.03%
TABR Dividend Stock Account -6.03
TABR Passive Index Account -4.87
TABR Tactical Moderate Account -2.36
TABR Tactical Conservative Account -1.55
TABR Bond Account +0.44
Please note a couple of things. The Passive Index Account is always fully invested, and makes no attempt to play defense. Second, and to be balanced, when markets make a V bottom, as they have appeared to do since December 24, the above results will be reversed, with TABR’s strategies lagging. Also, the only strategy that is 100% stock is TABR’s Dividend Stock Account, and it can be as little as 40% invested. The true value of TABR’s tactical strategies is not beating the market, but rather lowering risk in severe market corrections and bear markets, so that clients can attain their goals with a much smoother ride.
Bond Allocations
The 10-year Treasury Yield started the year at 2.40%, hit 3.23% twice, on October 8 and November 8, then dropped 55 basis points in just 7 weeks to end 2018 at 2.68%. With all of that, the Vanguard Total Bond Market Index Fund (VBMFX) lost -0.13% for the year. Below are the full-year returns for 3 of the 4 strategies in our accounts.
PIMCO Income Fund +0.63%
Sierra Tactical Core Income Fund -1.03%
BSCO Invesco 2024 Bullet Share -1.30%
About 60-65% of our bond money is devoted to corporate high yield, in combination with short term bond funds and our risk model for high yield. We currently are using 10 different high yield funds, such as Blackrock High Yield and Prudential High Yield. Our risk model gave a SELL in mid-February, closing out a 6.5% gain from January 2017. The model re-entered in late August, and lost about -1.4%, exiting in late October before a fairly large drop, especially in December. The Lipper High Yield Fund Index lost -2.97% for the year, but this area of the credit markets has rebounded strongly in January, along with equity markets, and as noted above, our model flipped positive in mid-January.
Below is the performance, net of management fees, of TABR’s five different portfolios at present. These represent a majority of the strategies we are using in client accounts, but not all. The differences are mainly attributed to risk (example—moderate allocation versus conservative allocation or aggressive) and account size. The numbers are for the one year ending December 31, 2018.
| Type of Account/Strategy | 2018 Return | Benchmark |
| TABR Tactical Moderate | -3.39% | -3.84%* |
| TABR Tactical Conservative | -2.86% | -2.72%** |
| TABR Bond Account | -1.22% | -0.13%*** |
| TABR Dividend Stock | -5.34% | -4.52%**** |
| TABR Passive Index Mix | -6.80% | -4.58%***** |
| Vanguard Total Stock Market Index | -5.26% | n/a |
| Vanguard Total International Stock Index | -14.44% | n/a |
| Vanguard Total Bond Market Index | -0.13% | n/a |
| Vanguard S&P 500 Index Fund | -4.52% | n/a |
*consists of 37.5% Vanguard Total Stock Index, 12.5% Vanguard Total International Stock Index and 50% Vanguard Total Bond Index
**consists of 26.25% Vanguard Total Stock Index, 8.75% Vanguard Total International Stock Index and 65% Vanguard Total Bond Index
***Vanguard Total Bond Index
****Vanguard S&P 500 Index Fund
*****consists of 45% Vanguard Total Stock Index, 15% Vanguard Total International Stock Index and 40% Vanguard Total Bond Index.
Returns shown are net of management fees, and include reinvested dividends
TABR’s 15th Anniversary
Time flies when you’re having fun. Fifteen years ago this week, we launched TABR Capital Management, after a near 19-year stint at the old Prudential Securities. Recently, we signed another five-year lease with our building near Angels Stadium, and all of us are looking forward to the changes and challenges that lie ahead, as we look to grow in a controlled manner, and ensure the continuity of our processes and service to our clients over the long haul.
Needless to say, it takes a team of good people to get where you’re going, and anything we’ve achieved has been a result of others who have helped us along the way. Life is a two-way street, and without you, our clients, we’d be dust in the wind. So, from all of us at TABR, we say THANK YOU. For being with us, trusting in us, and telling others about us. We’re looking forward to the future, with you.
Material Of A Less Serious Nature
After returning from his honeymoon in Florida with Virginia, his new bride, Luigi stopped by his old barbershop in Jersey to say hello to his friends. Giovanni said, “Hey Luigi, how wasa da treep?”
Luigi said, “Everything was perfecto except for da train ride down.”
“What do you mean, Luigi?” asked Giovanni.
“Well, we boarda da train at Grana Central Station. My beautiful Virginia, she pack a bigga basket a food. She even brought da vino and some nice cigars for me. We open uppa da luncha basket and the conductore come by, wagga his finger at us anda say, ‘no eat indisa car. Musta use a dining car.’…..”
“So, me and my beautiful Virginia, we go to da dining car. We eat a bigga lunch and starta to open da bottle of nice vino. Conductore walka by again, wagga his finger and say, ‘No drinks in disa car. Musta use a cluba car.’ So, we go to cluba car.”
“While a drinkina da vino, I starta lighta my bigga cigar. The conductore, he wagga is finger again and say, ‘No a smokina disa car. Musta go to a smokina car….’ We go to a smokina car and I smoke a my bigga cigar. Then my beautiful Virginia and I, we to a sleeper car anda go to bed. We just about to go boombada boombada and the conductore, he walks through da hallway shouting at da top of his a voice.”
“Nofolka, Virginia! Nofolka Virginia!”
“Nexta time, I’ma just gonna taka da bus!”
Happy New Year to all of you. Thanks for reading this far (I know, some of you cheat and just look for the joke). As always, we appreciate the trust and confidence you have in all of us at TABR. Here’s hoping your next train trip is better than Luigi’s!
Sincerely,
Bob Kargenian, CMT
President
TABR Capital Management, LLC (“TABR”) is an SEC registered investment advisor with its principal place of business in the state of California. TABR and its representatives are in compliance with the current notice filing and registration requirements imposed upon registered investment advisors by those states in which TABR maintains clients. TABR may only transact business in those states in which it is notice filed, or qualifies for an exemption or exclusion from notice filing requirements.
This newsletter is limited to the dissemination of general information pertaining to our investment advisory/management services. Any subsequent, direct communication by TABR with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of TABR, please contact TABR or refer to the Investment Advisor Disclosure web site (www.adviserinfo.sec.gov).
The TABR Model Portfolios are allocated in a range of investments according to TABR’s proprietary investment strategies. TABR’s proprietary investment strategies are allocated amongst individual stocks, bonds, mutual funds, ETFs and other instruments with a view towards income and/or capital appreciation depending on the specific allocation employed by each Model Portfolio. TABR tracks the performance of each Model Portfolio in an actual account that is charged TABR’s investment management fees in the exact manner as would an actual client account. Therefore the performance shown is net of TABR’s investment management fees, and also reflect the deduction of transaction and custodial charges, if any.
Comparison of the TABR Model Portfolios to the Vanguard Total Stock Index Fund, the Vanguard Total International Stock Fund and the Vanguard Total Bond Index Fund is for illustrative purposes only and the volatility of the indices used for comparison may be materially different from the volatility of the TABR Model Portfolios due to varying degrees of diversification and/or other factors.
Past performance of the TABR Model Portfolios may not be indicative of future results and the performance of a specific individual client account may vary substantially from the composite results above in part because client accounts may be allocated among several portfolios. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable.
The TABR Dividend Strategy presented herein represents back-tested performance results. TABR did not offer the Dividend Strategy as an investment strategy for actual client accounts until September/October 2014. Back-tested performance results are provided solely for informational purposes and are not to be considered investment advice. These figures are hypothetical, prepared with the benefit of hindsight, and have inherent limitations as to their use and relevance. For example, they ignore certain factors such as trade timing, security liquidity, and the fact that economic and market conditions in the future may differ significantly from those in the past. Back-tested performance results reflect prices that are fully adjusted for dividends and other such distributions. The strategy may involve above average portfolio turnover which could negatively impact upon the net after-tax gain experienced by an individual client. Past performance is no indication or guarantee of future results and there can be no assurance the strategy will achieve results similar to those depicted herein.
Inverse ETFs
An investment in an Inverse ETF involves risk, including loss of investment. Inverse ETFs or “short funds” track an index or benchmark and seek to deliver returns that are the opposite of the returns of the index or benchmark. If an index goes up, then the inverse ETF goes down, and vice versa. Inverse ETFs are a means to profit from and hedge exposure to a downward moving market.
Inverse ETF shareholders are subject to the risks stemming from an upward market, as inverse ETFs are designed to benefit from a downward market. Most inverse ETFs reset daily and are designed to achieve their stated objectives on a daily basis. The performance over longer periods of time, including weeks or months, can differ significantly from the underlying benchmark or index. Therefore, inverse ETFs may pose a risk of loss for buy-and-hold investors with intermediate or long-term horizons and significant losses are possible even if the long-term performance of an index or benchmark shows a loss or gain. Inverse ETFs may be less tax-efficient than traditional ETFs because daily resets can cause the inverse ETF to realize significant short-term capital gains that may not be offset by a loss.
For additional information about TABR, including fees and services, send for our disclosure statement as set forth on Form ADV from us using the contact information herein. Please read the disclosure statement carefully before you invest or send money.
A list of all recommendations made by TABR within the immediately preceding one year is available upon request at no charge. The sample client experiences described herein are included for illustrative purposes and there can be no assurance that TABR will be able to achieve similar results in comparable situations. No portion of this writing is to be interpreted as a testimonial or endorsement of TABR’s investment advisory services and it is not known whether the clients referenced approve of TABR or its services.