What Is The Value Of Your Advisor? - Retirement Plans

By SJS Senior Vice President & Director of Financial Institutions Craig Huntington.

Economic turmoil and seismic shifts in unemployment, consumer income, and savings have led to widespread uncertainty for the household finances of many. In spite of all of the uncertainty, SJS still believes that retirement plans remain a vital tool for American families to take control of their savings for retirement.

What do plan sponsors find important when it comes to structuring and managing retirement plans for their participants? Recently, Fidelity released the results of its 2020 Plan Sponsor Attitude Survey, using information from over 1,500 plan sponsors. SJS would like to highlight a few key takeaways from this survey, and provide details of how we have worked with plan sponsors to address their concerns and accomplish their goals.[1]

 

Why Offer A Retirement Plan?

From the survey, we learn that employers offer retirement plans for four primary reasons:

1. Ensure participants save throughout their working years (45% of plan sponsors agreed)

2. Provide adequate retirement savings to successfully replace participants’ income in retirement (20%)

3. Retain and recruit top employees (18%)

4. Remain Competitive in marketplace (17%)

Retirement Plan Concerns

Additionally from the survey, we learn that plan sponsors are particularly concerned about the following when designing and implementing a retirement plan:

1. Whether or not the plan is effectively preparing employees financially for retirement (27% of plan sponsors agreed)

2. Fiduciary responsibilities (18%)

3. Reducing business costs related to the plan (17%)

4. Whether or not the plan is helping to attract top talent (13%)

5. Whether or not the plan is helping to retain top employees (13%)

Increasing Participant Savings - Retirement Plan Features

Over SJS' 20+ years working with retirement plans and plan sponsors, we have learned that various plan features can significantly increase participant savings, including:

1. Setting up auto-enrollment when an employee is eligible to participate in your retirement plan

2. Increasing the default savings rate for your participants

3. Choosing investment options with lower expense ratios and more diversification

4. Improving your plan’s default investment choice (using low-cost well-diversified target-date funds)

5. Improving your employer matching formula to encourage more employee saving

6. Adding auto-increase / auto-escalation savings program, so your employees agree ahead of time to save an increasing percentage as their compensation increases

7. Providing a Roth savings option

8. Allowing your employees to contribute 100% of compensation up to legal limits

9. Improving your plan’s vesting rules

10. Scheduling the plan’s investment advisor to meet with your plan participants annually to educate them and answer questions

11. Sending emails to remind your participants of their current contribution levels, and demonstrate the potentially positive impacts of higher contributions

12. Introducing you to and collaborating with reliable, experienced, low-cost recordkeeping and administrator firms

Value Of An Advisor

As a plan sponsor, you may work with an investment advisor to aid in determining that your retirement plan investments are appropriate for your employees and to help you stay current with managing plan investments. Large and small employers want to better understand how their retirement plans are working for employees and how they can improve their plans as their business grow and change. As an investment advisor, SJS can work with you as you shoulder these responsibilities and you look to limit your liability and manage your risks.

Working with an investment advisor that is experienced in retirement plans can really help you as a plan sponsor to deliver a positive experience for your participants.

If you would like help in reviewing your retirement plan, please feel free to reach out to us. We are always here to listen and assist.

---

Craig Huntington has worked in the financial services industry for more than 20 years and oversees the financial institution channel at SJS. Craig is based in Naples, Florida. To contact Craig, you can email him at chuntington@sjsinvest.com or call him at +1-239-404-1925.

---

Important Disclosure Information and Sources:

[1] “2020 Plan Sponsor Attitudes Survey.“ Fidelity Investments & Harris Insights and Analytics, 2020, institutional.fidelity.com.

Advisory services are provided by SJS Investment Services, Inc.., a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only.

There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against a loss in a declining market.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

What Business Should You Start?

By SJS Founder & CEO Scott Savage.

As a business founder, I am often asked by aspiring entrepreneurs, “What business should I start?” If a picture is worth a thousand words, the diagram below should save you from reading too many words from me on this subject. To me, if you can find overlap in these three areas, you just might have a business idea.

Work That Energizes You

If you do what you love and energizes you, you will never work a day in your life. This is the sentiment that many business owners I work with often share. If you “feel the energy” in a certain type of work, step one is complete.

Is There A Market?

Determine if there is a market, meaning customers who value and are willing to pay for the goods or service you provide. The bigger the market, the better. A lot of competition means a big market. Don’t avoid starting a business because there is a lot of competition. Conversely, be wary of starting a business you think has no competition. In my experience, this is a red warning flag.

Can I Earn Money?

There is no shame in wanting to earn as much money as possible doing work that energizes you, and has customers who value what you are doing and who are willing to pay for it. I get up every day with the idea of letting the world know about problems we solve for clients of SJS. Solving problems for others is another way to say you are a business owner.

Good luck on your journey! I wish you the best.

---

Suggested Reading

---

How To Maintain Wealth For Generations

By SJS Founder & CEO Scott Savage.

Did you know that 70 percent of millionaire families lose their wealth by the second generation?[1] That generation would be only the grandchildren of the breadwinner. And did you know that 90 percent of families lose their wealth by the third generation, the great-grandchildren?[1] Those are scary statistics for people who have worked hard all their lives, built a business or other significant assets, and had dreams of that wealth providing the means for the people they love to live better lives of their own.

It’s really the “American Dream.” But wow! Who would have guessed the dream could end that way, and frequently does? We’re here to tell you – it doesn’t have to, once you know how to maintain wealth for future generations. This is something we do, day in and day out, helping to alleviate this concern for clients who view leaving an inheritance or a legacy as a priority. Please ask us, but until then, here’s what you need to know.

Talk to and educate your children about money

Most families don’t talk about money because many believe it’s not appropriate. That’s a big miss in terms of financial education.

Talk about the will

Everyone will find out who got what anyway, so why be secretive? It’s an opportunity to share your wishes for your legacy and for your family’s longevity.

Create a vision statement

Businesses have them. Why not families? Your vision statement serves as the grounding force that puts wealth into context. Money becomes more than money. It becomes a tool for something bigger. Create one together and share it.

These strategies are not a guarantee for successfully ensuring your legacy, but we have seen them work for many families. Give them a go, no matter how much money you currently have. Tomorrow is another day. Work hard, be deliberate about educating and communicating. You’ll create not just smarter children, but the legacy you always wanted.

---

Important Disclosure Information and Sources:

[1]  “5 lies you’ve been told about generational wealth.” Pavithra Mohan, 18-Jul-2019, fastcompany.com.

There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against a loss in a declining market. Advisory services are provided by SJS Investment Services, a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. This material has been prepared for informational purposes only.

---

Suggested Reading

---

Leave The Worrying To Us

---

By SJS Managing Director & Senior Advisor Jennifer Smiljanich, CFP®.

You’ve no doubt heard the phrase, “Patience is a virtue.” It can take extra effort to practice patience as an investor. With today’s advances in trading technology and the fast pace of news, we’ve seen daily swings of one percent or more in the market happen more often.[1] And if you’re like the many individuals who follow the daily gyrations of the market, then you know it doesn’t take much before stress creeps in.

That’s why you have SJS on your side. We help take the worrying right out of investing. Leave it up to us to be disciplined and patient. Markets will go up and down, that’s their nature. We believe it is more useful to spend our time on the things we can control. Focusing our efforts on these “controllables” can make a difference in the success of your investment experience.

Investment Costs

Dalbar’s Quantitative Analysis of Investor Behavior study on investor performance found that the average stock mutual fund investor underperformed the S&P 500 benchmark by 4.13% annually from 2010 through 2019.[2] As demonstrated in the graph below, for a $1,000,000 starting investment, this underperformance lowered growth by more than $1,000,000 compared to the S&P 500 benchmark. Higher management fees cause much of this underperformance for typical stock mutual fund investors.[3]

Another study suggests that traditional hedge fund management and performance fees consumed 64% of investor returns on average from 1995 to 2016.[4] Talk about a haircut on your net return!

At SJS, we believe that investors are entitled to receive the returns of the market. So we work hard to design portfolios in a way to keep your average cost of investing as low as possible.[5] Because just like in running a business, revenue is important, but the bottom-line profit determines whether you will stay in business and survive the long run.

Keeping your expenses low is important, that’s why many of our client portfolios are invested in institutional class mutual funds with average expenses ranging from 0.22% to 0.25%.

Taxes

Tax rates are out of our control, but we keep an eye on your portfolio design to manage activities that may generate tax. For example, SJS considers taxable events that might occur as a result of a need to rebalance your portfolio. We look for opportunities to reallocate within tax-deferred accounts to avoid generating taxable capital gains. As for stock mutual funds, we strive to select those that offer low turnover of securities.

We are always looking for ways to be mindful of the tax bite. That’s why we often position certain investments, such as publicly traded real estate or taxable high-coupon bonds in tax-deferred accounts, because they may generate income that is taxed at ordinary rates. These particular tax rates are often less favorable than capital gain rates.

Trading

There is no ‘free lunch’ when it comes to trading. There is a cost to buying and selling a security, whether it is a mutual fund, stock or bond.  While we generally support the idea of buying and holding a broad market portfolio, there are times when different asset classes or baskets of securities become heavier than their original weighting.  And this can cause your portfolio’s risk level to change.  If the change is small enough, we accept the incremental risk rather than place a trade.  But when the weighting changes enough, we accept the cost of trading as necessary to keep the risk in your portfolio at a level you are comfortable with.

When managing an investment portfolio, there is a lot to consider. If you have any questions about your investment portfolio, please reach out to us. We are always here to listen and assist!

---

Important Disclosure Information and Sources:

[1] “The Craziest Month in Stock Market History.“ Nick Maggiulli, 01-Apr-2020, ofdollarsanddata.com.

[2] “2020 QAIB Advisor Edition.” DALBAR, 2020, dalbar.com.

[3] “See the difference low-cost funds can make.“ Vanguard, 2020, vanguard.com.

[4] “The Performance of Hedge Fund Performance Fees.“ Itzhak Ben-David, Justin Birru, & Andrea Rossi, 2020, Ohio State University Fisher College of Business Research Paper Series.

[5] MarketPlus Investing® models consist of institutional quality mutual funds. Mutual fund investment values will fluctuate, and shares, when redeemed, may be worth more or less than original cost.

Advisory services are provided by SJS Investment Services, a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only.

There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against a loss in a declining market.

Indices are not available for direct investment. Their performance does not reflect the expenses associated with management of an actual portfolio. In US dollars. The index performance figures assume the reinvestment of all income, including dividends and capital gains. The performance of the indices was obtained from published sources believed to be reliable but which are not warranted as to accuracy or completeness.

The S&P 500 Index is a free float-adjusted market-capitalization-weighted index of 500 of the largest publicly traded companies in the United States.

---

Suggested Reading

---

I Know You Can’t Predict The Future, But….

---

By SJS Senior Advisor & Director of Institutional Investment Management Kirk Ludwig.

It’s human nature to ponder what the future holds and what it means to your investments. As the market grapples to understand the long-term implications of the COVID-19 pandemic, global trade, elections or (fill in the blank), the market continually factors known information into today’s prices, whether we understand all of the underlying factors, or not.[1] With so many variables influencing future market movements, it is a challenge to predict how the markets will respond…yet, investors still try to speculate on what happens next…we can’t help it, it’s our nature!

During periods of great uncertainty, markets can change course quickly, creating high volatility while the markets reprice risk. These periods, like we are experiencing in 2020, can be very perplexing to understand. How can stocks move higher when the future seems so uncertain? Are historically low interest rates signaling slow growth and low inflation for many years to come? What does the rise in the price of gold signal to the markets? These types of questions are endless.

Think of the market like a sports gambling bookmaker. If you were to place a bet on the outcome of a professional sporting event, you’d likely research who has home team advantage, injury lists, top player stats, and all the other factors which may give one team an advantage over the other. The bookmaker, and all the other gamblers, are aware of these same advantages. In order to even the playing field, the bookmaker will create a “spread”, giving the underdog extra points to compensate for these differences. At this point, you’re no longer betting on who wins, but you’re betting on if the spread is correct or not. This is much more difficult to predict!

The stock market, like the bookmaker, is always handicapping all known information. If you’re increasing or decreasing your risk exposure to stocks based on how you believe the current news will impact your investments, know that the market has already priced in these factors. What you’re really betting on is if your expectation is different than what the entire market, on average, is expecting. Again, a much more difficult prediction.

We don’t think that an investment strategy should be built on speculating if the market is accurately reflecting future expectations. More importantly, we think investors should reflect on how their investment strategy is positioned to meet their long-term desired outcomes based on long-term patterns.

At SJS, we focus our attention on the process and design. We develop portfolios to match the risk and return expectations of our clients through broad global diversification with the proper balance of growth and stability to match their long-term goals. We believe design matters most. Having the appropriate exposures to multiple asset classes and market factors improves the likelihood of a successful investment plan and removes the temptation to speculate on current events.[2][3]

If you would like to learn more about how to design your investment portfolio, feel free to reach out to us. We are always here to listen and assist!

---

Important Disclosure Information and Sources:

[1] “Eugene F. Fama, efficient markets, and the Nobel Prize.” John Cochrane, 20-May-2014, Chicago Booth Review.

[2] Unconventional Success: A Fundamental Approach to Personal Investment. David Swensen, 2005, Free Press.

[3] MarketPlus Investing® models consist of institutional quality mutual funds. Mutual fund investment values will fluctuate, and shares, when redeemed, may be worth more or less than original cost.

Advisory services are provided by SJS Investment Services, a registered investment advisor (RIA) with the SEC. Registration does not imply a certain level of skill or training. This material has been prepared for informational purposes only.

There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against a loss in a declining market.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

Saving as a Young Professional: Give Yourself Options

---

By SJS Associate Advisor Catherine Stanley and SJS Managing Director & Senior Advisor Jennifer Smiljanich, CFP®.

Never in a thousand years could we have imagined what it would be like to personally live through the upheaval of this 2020 global pandemic! While there are some silver linings, to be sure, many of us, to some degree, have been affected by feelings of fear, isolation, disruption, limitation, and boredom. Some of us are left feeling a little vulnerable, and it might not feel good.

But sometimes, uncomfortable feelings can serve as a catalyst, and can move us to take action that might not occur during times of “business as usual,” when we may feel happy and at ease. The uncertainty of our world today can open us up to thinking about how we can make our life a little safer, better, or a bit more comfortable in the future. Ironically, one of the greatest things we can do in an attempt to ensure a better future is to acknowledge that something should be done, and to start as young as possible with a plan to make it happen.

The something referred to here is saving and investing for your future. For young professionals in their 20s and 30s, the future, and the idea of retirement can seem very far off and too hard to predict. Not knowing where to start can seem overwhelming, to the point where doing nothing is an easy default.

Although we never know what tomorrow will bring, we do know that our future self will want to be able to choose from options. One of the ways for this to happen is for young professionals to start a savings and investing plan today, so that the power of time and compounding may work on your side. Wise decisions and actions today can often give you more options tomorrow. We hope the uncertainty of this pandemic, and knowing you have someone at SJS to talk to, may nudge you to start your savings and retirement plan. If you’ve already started, well done!

To that end, we will revisit some of the tried and true strategies behind a solid investment plan.

Live within your means

Simply put, spend less than you earn. By doing so, you can save to take care of future YOU! There are many thoughts on how much you should save, but according to George S. Clason, author of The Richest Man in Babylon, at least 10%. Mr. Clason states, “A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford.”[1]

There are many good budgeting tools available to help you track how much you are spending to live within your means.[2] If you don’t know how much you spend, this is a good place to start!

Automate your savings / investing so it has priority

For every paycheck, set up an automatic transfer to your savings or brokerage account. Making YOU important enough to come first is very affirming!

Start young, start early, start now!

I mentioned the power of compounding before, and I cannot explain it any better than this powerful graphic. Take a look, and trust that you are doing yourself a huge favor by acknowledging its power and harnessing it for your own good. Save as soon as you can, as much as you can, and let time and interest on interest help build your nest egg!

Be prepared

By doing some pre-planning and using the tools available to you, you can increase the likelihood of staying on track.  

• Have a Plan B.  Set aside funds in case of an emergency. Ideally, your emergency fund should be between 3-6 months of living expenses, kept in a safe, liquid vehicle such as a savings account or money market account.[3] So when your next “uh, oh” moment comes along, you will be ready.

• Don’t just save. Invest for retirement.  With investing, you will need to learn about the trade-off between risk and reward. Investments that give you higher returns may potentially get you to your retirement goal sooner, but they inherently come with greater risk. On the other hand, the safest of investment vehicles, such as a US Treasury bill, probably won’t earn enough return to outpace inflation over time. Find the right balance for you! Seek out a CFP® professional or trusted investment adviser to help you set a plan that meets your needs and stay the course. If you have a long-term plan and stick with it, then the daily volatility in the market may be just noise.

• Maximize your resources.  If your employer has a 401(k)-matching plan, take advantage of it to the greatest extent that you can…matching funds are free money! Consider making IRA contributions if you can. Pre-tax contributions to retirement plans and IRAs may decrease the amount of tax you pay on your income each year, and the funds will grow tax-deferred, compounding over the 30+ years you have until retirement.

• Start a 529 education savings plan as a way to use compounding to help pay for your child’s college education. There is often a state tax deduction or credit available for 529 plan contributions, varying by state.

Starting your savings and investment journey today means you’ll have to balance today’s current enjoyment with tomorrow’s future enjoyment. Decisions or circumstances along the way may create diversions from the path, but if you have a strategy, you can always come back to it. The goal is to stay on track so that over time, future You will appreciate that you gave yourself options to choose from. At SJS, we are happy to have these conversations with you, and to help guide you to an investment plan for the long-term that you can stick with.

---

Important Disclosure Information and Sources:

[1] The Richest Man in Babylon. George Clason, 1926, Berkley.

[2] “10 Simple and Free Budgeting Tools.” Maryalene LaPonsie and Lars Peterson, 21-Jun-2019, money.usnews.com.

[3] “Emergency Fund: What it Is and Why It Matters.” Margarette Burnette, 20-Mar-2020, nerdwallet.com.

Advisory services are provided by SJS Investment Services, Inc.., a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only. There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against a loss in a declining market.

---

Suggested Reading

---

SJS Investment Services Recognized In RIA Channel's 2020 Top 100 Wealth Manager List

SJS Investment Services has been recognized in RIA Channel’s 2020 Top 100 Wealth Manager List, an annual ranking of independent investment advisory firms within the United States.[1]

“Being recognized by RIA Channel as one of their Top 100 Wealth Managers in 2020 is humbling, and simply reflective of the faith, commitment, and loyalty our clients have demonstrated in SJS over the last 25 years,” says SJS Founder & CEO Scott Savage.

RIA Channel ranked the Top 100 RIA firms of 2020 based on a proprietary set of criteria and data. According to RIA Channel, the ranking is based on both size and growth in assets as of June 30, 2020, as reported to the SEC.[2] RIA Channel uses its RIA Database for regulatory data, organic research, and advisor surveys. There is no fee to apply or to secure placement within the ranking.[3][4]

If you would like to learn more about how we work with families and organizations, please reach out to us. We are always here to listen and assist.

---

Important Disclosure Information and Sources:

[1] “RIA Channel 2020 Top 100 Wealth Managers.” RIA Channel, 2020, riachannel.com.

[2] SJS Investment Services reported total assets under management (AUM) of $2,199,760,896 on Form ADV as of December 31, 2019.

[3] “RIA Channel 2020 Top 100 Wealth Manager List Methodology.” RIA Channel, 2020, riachannel.com.

[4] SJS did not submit a survey to RIA Channel.

Past performance is no guarantee of future results. There is no guarantee investment strategies will be successful.

---

Suggested Reading

---

What Is The Value Of Your Advisor? – Looking Out for Your Best Interests

By SJS Senior Client Portfolio Manager Tom Kelly, CFA.

Last year, I wrote a piece entitled What is the Value of Your Advisor?, which highlighted some of the aspects of your relationship with your SJS advisor, such as designing portfolios to support your goals, reviewing your current investment approach, and recommending revisions that might make sense for you. Our approach is centered around sitting on the same side of the table as you, acting as a fiduciary, being bound ethically to act in your best interests.

Unfortunately, some in the investment business haven’t always shared this approach. With potential misaligned incentives, some firms focused on selling complex high-fee products that have led investors to sacrifice net-returns to costs and commissions, losing a lot of money unnecessarily in the process.

One example was recently highlighted in The Wall Street Journal article, “Bankrupt in Just Two Weeks – Individual Investors Get Burned by Collapse of Complex Securities.” Investors seeking high returns poured their portfolios into leveraged exchange-traded notes, which are unsecured debt instruments that follow an underlying index of securities. Exchange-traded notes are often pitched as offering steady payouts and high upside compared to typical investments such as bonds or indexed mutual funds. But the devil is in the details, and the notes can come with high fees and complexities such as being redeemed at a moment’s notice when it favors the issuer, not the investor. The Securities and Exchange Commission (SEC) even issued an Investor Bulletin in 2015 to inform investors of the significant investment risks and complexities of these instruments.[1] The swift market collapse in March left several notes virtually worthless when they were redeemed by the issuing banks, leaving investors with significant realized losses.[2]

As the economic adage says, “There’s no such thing as a free lunch.”[3] Unfortunately for some, the cost of that “free lunch” was their entire life’s savings. In the investing world, we know all too well that there is no such thing as a long-term investment that is both safe and highly profitable. That’s why we design portfolios specific to you to help you achieve your financial goals, carefully balancing your risk tolerance and ability with your return needs.

So the next time you hear about a hot tech stock or a “can’t miss” investment product, pause and remember this cautionary tale. We’ll be here with our disciplined, time-tested approach to investing. We invite you to give SJS a call! We are happy to buy you lunch, but if makes you feel better, we will split the check too!

---

Important Disclosure Information and Sources:

[1] “Investor Bulletin: Structured Notes”. SEC Office of Investor Education and Advocacy, 12-Jan-2015, sec.gov.

[2] “‘Bankrupt in Just Two Weeks’—Individual Investors Get Burned by Collapse of Complex Securities.“ Akane Otani & Sebastian Pellejero, 01-Jun-2020, wsj.com.

[3] There’s No Such Thing As a Free Lunch. Milton Friedman, 1975, Open Court Publishing Company.

Advisory services are provided by SJS Investment Services, Inc., a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Diversification neither assures a profit nor guarantees against a loss in a declining market.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

SJS Investment Services Recognized In Financial Advisor Magazine’s 2020 Registered Investment Advisor Rankings

SJS Investment Services has been recognized in Financial Advisor Magazine’s 2020 Registered Investment Advisor (RIA) Rankings, an annual ranking of independent investment advisory firms within the United States.[1]

“Recognition by one of the financial industry’s most respected publications is humbling, and simply reflective of the faith, commitment, and loyalty our clients have demonstrated in SJS over the last 25 years,” says SJS Founder & CEO Scott Savage.

Financial Advisor (FA) Magazine’s 2020 RIA Survey & Ranking is a ranking based on assets under management as of 31-Dec-2019. FA Magazine orders firms from largest to smallest, based on AUM reported by firms that voluntarily complete and submit FA Magazine’s survey by the given deadline. FA Magazine verifies AUM by reviewing ADV forms. To be eligible for the ranking, firms must be independent Registered Investment Advisors and file their own ADV statement with the SEC, and provide financial planning and related services to individual clients. Corporate RIA firms and Investment Advisor Representatives (IARs) are not eligible. There is no fee to apply or to secure placement within the ranking. 551 RIA firms were included in the 2020 ranking. FA Magazine does not track the number of firms that applied but failed to meet the required criteria.[1]

If you would like to learn more about how we work with families and organizations, please reach out to us. We are always here to listen and assist.

---

Important Disclosure Information And Sources:

[1]: “RIAs In The Time Of Pandemic.” Financial Advisor Magazine, Aug-2020, fa-mag.com.

Past performance is no guarantee of future results. There is no guarantee investment strategies will be successful.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

When Should You Start A Business?

By SJS Founder & CEO Scott Savage.

Based on personal experience and sitting in the front row watching hundreds of business dramas play out before my eyes over the last three and a half decades, I feel comfortable commenting on this subject. One way to define the moment when you make the decision to launch a business:

WHEN THE DISCOMFORT OF YOUR CURRENT SITUATION OUTWEIGHS THE DISCOMFORT OF LAUNCHING YOUR NEW BUSINESS.

Acting, despite your fears, is a common denominator of most business startups.

George Addair, a serial entrepreneur in the late 19th century, captured the essence of my point very succinctly:

“Everything you’ve ever wanted is on the other side of fear.”

— George Addair

Quitting my day job and launching SJS on the same day was a regulatory necessity, but not typical of many of the startups I have seen launched.  Many, if not most, successful entrepreneurs started their businesses at night and on the weekends while keeping their day jobs, often for years.  A famous example is Jeff Bezos, who started Amazon (perhaps you’ve heard of it?) on the side while hanging on to the security of his day job!

THIS IS THE BIG SECRET I HAVE LEARNED ABOUT ENTREPRENEURS: THEY ARE VERY RISK AVERSE.

What? Risk averse?  Most people equate business startup with risk. While that may be true, the business founders I’ve advised over the years are risk averse and want as much control over their life and finances as possible.

FEAR, UNCERTAINTY, AND DOUBT, are emotions that virtually all business founders must overcome and learn to live with. Behavioral Science has even given a name to the feeling of inadequacy these leaders feel: the IMPOSTER SYNDROME – the idea that you’ve only succeeded due to luck, and not because of your hard work.[1]

As SJS celebrates 25 years, I am happy to report what many entrepreneurs often say, “I’ve never worked a day in my life!“ The decision I made 28 years ago was inspired by the discomfort I felt due to the conflicts of interest that I perceived were inherent in the brokerage industry. “Sitting on the same side of the table” with my clients with the duty as a fiduciary to always act in their best interest was, and is, my happy place.

My Dad often preached to me to start a business. He said the worst thing you can do is fail. And there’s nothing illegal or immoral about failing.

Heck, you might even succeed!

---

Important Disclosure Information and Sources:

[1]: “Yes, Impostor Syndrome Is Real. Here’s How to Deal With It.“ Abigail Abrams, 20-Jun-2018, time.com.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

The Importance Of Preparation

---

Financially Preparing For Future Life Events

By SJS Manager of Client Services Lisa Denstorff.

No matter how much you prepare, unexpected events will sometimes cause you financial stress. It could be a new health problem, a sudden job loss, a pandemic, or some other unexpected event. And yet, over our 25+ years of working with clients, we have learned that effective preparation can help you avoid potential problems and undesired outcomes in the future.

For example, we recently assisted a surviving spouse who had NOT been the primary caretaker of the family’s investment and estate planning. Unfortunately, some basic organizational and planning strategies such as beneficiary designations on investment accounts had not been completed. And the result was the need for the surviving spouse to hire a lawyer and work through the probate process – one more challenge to face during the grieving process.

The surviving spouse also reached out to us at SJS. We were able to help organize important financial documents, provide a summary of existing assets and liabilities, collaborate with the estate attorney and accountant, and simplify and consolidate investment accounts. Our new preparations helped design a more diversified investment portfolio.

Now, with proper account titling and beneficiary designations in place, the client can feel confident that one day the assets will pass on appropriately to loved ones or for charitable gifts as intended, without complications to the loved ones.

Working through important financial issues (such as applying for Social Security survivors benefits, selling / buying a new home, creating a new estate plan, filing taxes, etc.) is difficult, and can be exacerbated during periods of grief, anxiety, and stress. If we better prepare for these issues in times of relative calm, then we can potentially avoid much of the stress in more troubling times.

What can you do to financially prepare for future life events? We suggest you consider the following:

• Inform a loved one or trusted contact as to where your financial documents are stored

• Prepare a list of assets, custodians, debts, household bills, etc.

  • Store or back up this information electronically

• Provide all important documents (will, healthcare power of attorney (POA), trust documents, etc.) to your financial advisor, accountant, estate attorney, etc.

• Review beneficiaries and account registrations annually on all assets

If you have any questions or want to discuss handling life events, please feel free to reach out to us. The team at SJS is always here to listen and to help ensure your financial peace of mind.

---

Important Disclosure Information:

Advisory services are provided by SJS Investment Services, Inc., a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

What To Do When Your Baby Grows Up

---

How Do You Manage Those Accounts?

By SJS Director of Client Services Jeff Yost.

One minute, they’re newborns. The next minute, they’re in grade school. And the minute after that, they’re lobbying for a car – either yours, or one to call their own. The fact is, kids grow up fast and, while you likely have received plenty of well-meaning parenting advice over the years, you probably have received less advice on how to manage those investment accounts you or a loved one set up soon after your bundles of joy entered the world, or at some point during their childhoods.

With so many other things to think about like grades, colleges, activities, and – let’s face it – the 24/7 job of raising good kids, it’s no wonder that few parents think about what to do with their minor accounts, also known as custodial accounts, once their babies grow up.

Many people are unaware that the age at which a custodial account may terminate and convert to an individual account varies across states. In most states, termination occurs at either age 18 or 21. For example, in the state of Ohio, if your child is age 18, you have a choice. You can maintain investments in a custodial account until your child reaches age 21, or you can convert the investments to a new individual account in your child’s name. When your child reaches age 21, a custodial account must be converted to an individual account in your child’s name.

Do you have concerns that your child is not yet ready to shoulder this responsibility on his or her own? There is an option to add one or both parents as joint owners on the account, whether the account is converted at age 18 or 21.

No matter which option you choose, the process is simple. Just contact us or stop in and we’ll get the paperwork going. We’ll send you everything you need, including new account documents and an SJS investment management agreement for your adult child to sign. That’s it.

As long as you are working with us, you have a team who has managed the transitions and the accounts of countless SJS babies, many of whom are now second-generation clients. We believe no one is too young for good investment discipline.

---

Suggested Reading

---

The Markets And Economy Are Loosely Connected

Just like walking your dog!

By SJS Founder & CEO Scott Savage.

Why is the stock market so volatile? What is today’s big drop telling us about the economy? What about yesterday’s big jump? Is there a recession coming? Another depression? Will I miss out on a market rebound?

We are experienced enough to know that we don’t know all the answers. But history has demonstrated that over long periods of time, the stock market and the economy are linked. As the stock market goes, so goes the economy. However, in any given year, economic ups and downs can diverge significantly from the direction of the market.

A well-traveled industry metaphor may be helpful in understanding the relationship between the day to day movement of the stock market and the real economy.

Imagine a dog owner steadily walking her dog through the park. The dog is on a leash but doing what dogs do in a busy park on a leash: barking, jumping, straining on the leash. To the left, then right, and then SQUIRREL!

The dog is the stock market, the dog owner is the economy. They end their walk in the park together, but along the way they sometimes move together, sometimes in opposite directions. If you simply watch the dog for a period of time, you might not know WHAT direction they are headed!

So the next time the market goes way up, or way down, we hope the dog owner and their “best friend” analogy will help you keep the long term view. That’s the view—and destination—we had in mind when your investment portfolio was designed in the first place.

---

Suggested Reading

---

Mid-Year Updates: IRA And PPP Rules

---

By SJS Managing Director Jennifer Smiljanich.

In the current economic environment, the federal government has stepped in with the CARES Act legislation and other stimulus to help provide greater financial flexibility for Americans.  In the last few weeks, there have been two additional rulings that intend to offer help to those needing relief.  Below, we offer a summary of how those rulings may affect you. As always, please be sure to check in with your tax professional for guidance.

IRA Distribution Relief, Part 2

Earlier this year, the CARES Act allowed individuals who would be required to take a distribution from an IRA or defined contribution retirement plan in 2020, to avoid taking any withdrawals.  In Notice 2020-51 issued on June 23rd, the IRS offered further relief regarding Required Minimum Distributions (RMDs).

First, the 60-day rollover period for any RMDs already taken this year has been extended to August 31.  This extension will allow more taxpayers to take advantage of this relief. Second, Notice 2020-51 directs that any IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31.[1]  

For those individuals who took IRA distributions early in the year or who took distributions as beneficiaries of inherited IRAs, this guidance offers the option to return all or part of those distributions by August 31.  More flexibility is certainly good news and offers a “fair and favorable outcome” to those who took distributions in compliance with the rules early in the year.[2]

Paycheck Protection Program Flexibility Act of 2020

On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law, amending the CARES Act.  Among its provisions, the PPPFA offers greater latitude to the millions of businesses that applied for Paycheck Protection Program (PPP) loans, as follows:[3]

• Extended covered period for PPP loan forgiveness from 8 weeks to the earlier of 24 weeks or December 31, 2020.  Borrowers who received loans before June 5 may extend or keep the original 8-week period.

• Reduced the requirement that payroll costs make up 75% of covered loan amount to 60% in order to receive loan forgiveness.

• Increased PPP loan maturity from a minimum of 2 years to 5 years for loans originating after June 5, 2020.   

• Extended safe harbor deadlines from June 30 to December 31 to restore any reductions in salaries or hourly wages, or full-time equivalency levels.

• Amended reduction in loan forgiveness associated with staff levels.  The PPPFA added flexibility if Borrowers could document an inability to re-hire or hire qualified employees; or could document an inability to return to similar business operations as of February 15, 2020 due to compliance with COVID-19 restrictions.

• Allowed borrowers receiving loan forgiveness to also defer payroll tax payment per CARES Act provisions. 

Please know that your SJS team is here to help guide you through these ever-changing and difficult times. Please feel free to reach out to us with any questions.

---

Important Disclosure Information and Sources:

[1] “IRS Extends RMD Rollover Relief Under CARES Act.” Melanie Waddell, 23-Jun-2020, thinkadvisor.com. 

[2] “New Rollover Rules For Unwanted 2020 RMDs Under IRS Notice 2020-51… Welcome Relief And A Troubling Precedent.” Jeffrey Levine, 25-Jun-2020, www.kitces.com.

[3] “Paycheck Protection Program – Where are we Now?  An Up-to-Date Guide to the Paycheck Protection Program.”  Proskauer, 24-Jun-2020, proskauer.com.

SJS Investment Services does not provide legal or tax advice. Please consult your legal or tax professional for specific advice. This material has been prepared for informational purposes only.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

Market Movements Q2 2020: The Sequel

By SJS President Kevin Kelly, CFA.

EQUITY MARKETS

Last quarter, global markets experienced a synchronous drop in equity asset classes. Investors around the world arrived at lower market valuations that included falling revenues and newly identified risks. We can now offer a more encouraging picture as a rising trend has been evident in the same asset classes during the second calendar quarter:

Source: Morningstar.com, July 1, 2020. Equity asset classes are considered representative by SJS Investment Services based on actual results of institutional mutual funds within these categories (DFQTX, DFIEX, DFCEX, and DFGEX). Actual performance for each client may be different. Past performance is no guarantee of future returns.

As of June 30, 2020, the quarterly gain in major equity asset classes spanned a positive range of 12 to 22%.

THOSE DOGGONE PREDICTIONS!

It is worth re-stating that in our estimation and experience, most predictions are largely speculative and unreliable. The only prediction we are prepared to make is based on historical evidence that prices/economies tend to recover after economic shocks.

But we acknowledge that things can get worse from here and the current upward trend is in no way guaranteed to continue. Predicting where the dog at the end of the leash will go is range-bound at best…and even then, the dog can sometimes break his leash!

Investments, by their nature, are unpredictable. Yet we continually strive to manage your investments so that you can have the confidence that your MarketPlus® portfolio has been trained at obedience school!

If you ever find the investment markets make you “uncomfortable,“ let us do the worrying for you, so you can focus on the people and causes that matter most to you. We are always here for you, to lend an ear, to listen, and assist!

---

Important Disclosure Information:

Past performance is no guarantee of future results. There is no guarantee investment strategies will be successful. Diversification neither assures a profit nor guarantees against a loss in a declining market. MarketPlus Investing® models consist of institutional quality mutual funds. Mutual fund investment values will fluctuate, and shares, when redeemed, may be worth more or less than original cost.

Indices are not available for direct investment. Their performance does not reflect the expenses associated with management of an actual portfolio. The performance of the indices was obtained from published sources believed to be reliable but which are not warranted as to accuracy or completeness.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

Three Traits Successful People Share

Do You Have Them? Are You Raising Your Children to Have Them?

By SJS Founder & CEO Scott Savage.

I’ve been fortunate in my life. My work as the Founder and CEO of SJS Investment Services puts me in front of so many fascinating people who are successful, many of them self-made. Each one has a story to tell, and I gladly listen. Because I’ve come to discover that within each story about “those humble beginnings” are the clues to the degree of success—and happiness—achieved in the end.

This unscientific, but easily observable pattern of what it takes to succeed, has guided me in my business, in my personal life, and in my parenting. I’d like to say I have hit a home run on all fronts, but I haven’t. It can be all too easy to forget these basic truths—particularly when my children are involved. I appreciate clients around me who share their stories and serve as gentle, yet powerful, reminders of not only what makes people great, but our nation great, too. Here are the three traits:

Many successful people have known adversity

In the case of the self-made success story, often the story began with some hardship or challenge. Maybe it was poverty, and they struggled to make ends meet—some of the most poignant tales come from The Great Depression. Or as young children, they were expected to be part of the family income stream and earn their way. Often as children, their paper route and babysitting money went to the family to help make ends meet. They were seldom given anything, and instead had to earn it on the farm, in their community and sometimes even in the family business. Adversity turns children into adults who are more likely to value what they have, because it was earned and not given.

Many successful people learned the meaning of hard work at an early age

Earl Nightingale said, “Success is the progressive realization of a worthy ideal.” And I have found in my life and in the lives of successful people I know that when you are working hard, you are on the journey—the progressive realization—of success. I hear my clients tell stories of their youth and speak with pride about rising before dawn and getting to their chores. They learned through responsibility that no matter how hard the task, you work until it is done. And I can see it in their eyes, and hear it in their voices as they remember those days, the same pride of accomplishment they felt as kids, often some sixty years earlier. Through hard work, children may learn to appreciate the value of working towards a goal and to achieve pride and confidence in their accomplishments.

Many successful people have saved all their lives

The successful people I know have never spoken of working to buy things. They worked because it had to get done and whatever rewards they got, they saved. Work was the green light to save money, not spend it. This belief became a habit in the way they ran their lives, their businesses and today their investments. Saving can turn hard-workers into millionaires.

I tell my clients, many of whom are farther down life’s path than I am, that they are role models for me. Their example and insights have helped me to prepare my own family for the future. I’d like to say I have raised my kids to have the strength to overcome adversity, work hard, and save, but I am far from perfect. Everyone wants more for their kids than they themselves had, and that means life often gets easier with each generation. But at a time when the next generation is entering a world economy, competing with others who grew up living a harder life, will our children be prepared to succeed? That question concerns me, and I know I am not alone.

I share this because it’s never too late to pick up good habits. And judging from my clients’ stories, it’s never too early, either.

---

Suggested Reading

---

Value Opportunities

By SJS President Kevin Kelly, CFA.

Investor Howard Marks recently wrote, “All great investments begin in discomfort… ‘When the time comes to buy, you won’t want to.’ It’s not easy to buy when the news is terrible, prices are collapsing and it’s impossible to have an idea where the bottom lies. But doing so should be the investor’s greatest aspiration.”[1]

In an effort to buy low and sell high, many investors attempt market timing. However, studies have repeatedly shown that most investors who attempt to time the market significantly underperform broad market indices, due to many factors.[2] So if market timing is not reliable, what else can investors do to achieve higher expected returns?

MarketPlus Investing focuses on broad global diversification across thousands of securities via mutual funds. At the same time, we systematically seek stock attributes that have demonstrated higher expected returns over time.[3] Relative to broad market stock indices, MarketPlus Investing invests in mutual funds that tend to overweight stocks with financial qualities that, relative to their trading prices, have provided premium returns historically.[3,4]

Some of these qualities point us to smaller company stocks.[3] Other financial attributes suggest a bias towards “value stocks”, a quality that famed investor Warren Buffett tends to favor.[3,5]

In the spirit of Howard Marks, recent returns of small value stocks have provided plenty of discomfort, especially compared to the “blue chip“ index as represented by the S&P 500.

Sources: Ken French Data Library, Dimensional Fund Advisors Returns Web. As of 30-Apr-2020. See Important Disclosure Information for additional details.

But other than “discomfort,” are there any measurable indications that small value stocks may be a good place to invest? Perhaps one indication is that the valuation differences between US growth stocks and value stocks are at or near their greatest dispersions in history.[6] In particular, US growth stocks (particularly large growth stocks) are currently trading near valuations not seen since the 2000 Dot Com Bubble.[7] Contrarily, value stocks (particularly small value stocks) are below 40-year valuation averages, as demonstrated below.[8]

Sources: Dimensional Fund Advisors, CRSP, and Compustat. As of 31-Mar-2020. See Important Disclosure Information for additional details.

We do not believe these major valuation differences will continue over the long-term. Much of the recent outperformance of growth stocks is attributable to the performance of five of the largest stocks in the S&P 500: Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), Alphabet (GOOG / GOOGL), and Facebook (FB).[9] These stocks currently make up > 20% of the S&P 500, and are all trading near all-time highs.[9] Based on forward price / earnings ratios, the stock market has already priced in high growth into these companies’ valuations.

Sources:  Morningstar Direct, YCharts, Yahoo Finance. As of 29-May-2020. See Important Disclosure Information for additional details.

We think historically cheap investments are more likely to provide higher returns over time than expensive investments, and the data suggests small and value stocks are relatively quite cheap today.[10,11]

There are sometimes rare opportunities when specific parts of the market are very attractively valued relative to broad markets, which often leads to higher expected returns over time.[12] Is this such an opportunity? Only time will tell. But we believe broad diversification and a disciplined rebalancing mechanism that incorporates valuations helps investors get appropriate returns for the risk they are assuming.

When you “buy low,” and prices go lower still, it can be a test of investment conviction. Nonetheless, we believe right now is a good time to stick with and lean-in to our disciplined investment approach called MarketPlus Investing.

If you ever find the investment markets make you “uncomfortable,“ let us do the worrying for you, so you can focus on the people and causes that matter most to you. We are always here for you, to lend an ear, to listen, and assist!

---

Important Disclosure Information and Sources:

1. “Calibrating.“ Howard Marks, 06-Apr-2020, oaktreecapital.com.

2. Unconventional Success. David Swensen, 09-Aug-2005, Free Press.

3. “A Five-Factor Asset Pricing Model.“ Eugene Fama and Kenneth French, September 2014, Journal of Financial Economics.

4. “Dimensional Fund Advisors: A Deeper Look At The Performance.“ Mark Hebner and Murray Coleman, 04-Dec-2019, ifa.com. Please see Important Disclosure Information for additional information on MarketPlus Investing All Equity Model Portfolio.

5. “Berkshire Hathaway Inc. Shareholder Letters – 2020.“ Berkshire Hathaway, 2020, berkshirehathaway.com.

6. “Is (Systematic) Value Investing Dead?“ Cliff Asness, 08-May-2020, aqr.com.

7. “Lessons From the Dot-Com Bust.“ Mark Hulbert, 08-Mar-2020, Wall Street Journal.

8. “Spread the Word: What’s New with Valuation Ratios.“ Dimensional Fund Advisors, 14-May-2020, mydimensional.com.

9. “How Markets Work and the FAANG Mentality.“ Dimensional Fund Advisors, 2019, us.dimensional.com.

10. “Vanguard’s economic and market outlook for 2020: The new age of uncertainty.“ Vanguard Research, Dec-2019, vanguard.com.

11. “An Apology for Small-Cap Value.“ Verdad Capital, 04-May-2020, verdadcap.com.

12. “Crisis Investing: How to Maximize Returns During Market Panics.“ Daniel Rasmussen, Brian Chingono, Graham Infinger, Bryce McDonald, Greg Obenshain, and Chris Satterthwaite, 2019, verdadcap.com.

Past performance is no guarantee of future results. There is no guarantee investment strategies will be successful. Diversification neither assures a profit nor guarantees against a loss in a declining market.

Indices are not available for direct investment. Their performance does not reflect the expenses associated with management of an actual portfolio. The performance of the indices was obtained from published sources believed to be reliable but which are not warranted as to accuracy or completeness.

MarketPlus Investing® models consist of institutional quality mutual funds. Mutual fund investment values will fluctuate, and shares, when redeemed, may be worth more or less than original cost.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

As of 29-May-2020, the MarketPlus All Equity Model is composed of the Dimensional US Core Equity II Fund (DFQTX: 54% weight), Dimensional International Core Equity Fund (DFIEX: 27% weight), Dimensional Emerging Markets Core Equity Fund (DFCEX: 9% weight), Vanguard US Real Estate Fund (VGSLX: 5% weight), Dimensional International Real Estate Fund (DFITX: 5% weight). There are limitations inherent in model allocations. In particular, model performance may not reflect the impact that economic and market factors may have had on the advisor’s decision making if the advisor were actually managing client money. Not to be construed as investment advice.

Advisory services are provided by SJS Investment Services, Inc.., a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only.

Statements contained in this report that are not statements of historical fact are intended to be and are forward looking statements. Forward looking statements include expressed expectations of future events and the assumptions on which the expressed expectations are based. All forward looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected.

The S&P 500 Index is a free float-adjusted market-capitalization-weighted index of 500 of the largest publicly traded companies in the United States.

SJS Investment Services (SJS) has created hypothetical performance returns and financial information for the S&P 495 using actual historical performance and financial information of the S&P 500 and five constituent equities: Microsoft (Ticker MSFT), Apple (APPL), Amazon (AMZN), Alphabet (GOOG / GOOGL), and Facebook (FB). The S&P 495 is not an actual index created nor managed by Standard & Poor’s. The S&P 495 hypothetical historical returns do not reflect actual trading or the performance of actual accounts. Actual client results may be materially different than the hypothetical returns. All returns presented include reinvestment of dividends and other earnings.

Value (Fama/French US Value Research Index), Growth (Fama/French US Growth Research Index), Small Value (Fama/French US Small Value Research Index):

• Composition: The index portfolios for July of year t to June t+1 include all NYSE, AMEX, and NASDAQ stocks for which we have market equity for December t-1 and June of t, and (positive) book-to-market equity data for fiscal year ending in t-1.

• Exclusions: ADRs, Investment Companies, Tracking Stocks, non-US incorporated companies, Closed-end funds, Certificates, Shares of Beneficial Interests, and negative book values. Sources: CRSP databases for returns and market capitalization: 1926 -present Compustat and hand-collected book values: 1926- present CRSP links to Compustat and hand-collected links: 1926- present.

• Breakpoints: “The size breakpoint is the market capitalization of the median NYSE firm, so the big and small categories contain the same number of eligible NYSE firms. The BtM breakpoints split the eligible NYSE firms with positive book equity into three categories: 30% of the eligible NYSE firms with positive BE are in Low (Growth), 40% are in Medium (Neutral), and 30% are in High (Value).”

• Rebalancing: Annual (at the end of June) 1926-Present Fama/French and multifactor data provided by Fama/French.

• Stocks are sorted on book-to-market ratio each June, where book-to-market for year t is computed using the book equity for the last fiscal year end in t-1, divided by market equity for December of t-1. Value and growth are stocks with book-to-market ratios above and below the 70th and 30th percentiles for NYSE stocks, respectively. Aggregate price-to-book value computed as the inverse of the weighted average book-to-market ratio where market equity is for the current month.

• Small stocks are NYSE, AMEX, and NADSAQ stocks below the median market cap for NYSE stocks, and big stocks are above the NYSE median. Value portfolios include NYSE, AMEX, and NASDAQ stocks above the 70th percentile of the book-to-market equity ratio (B/M) for NYSE stocks. Small Value stocks are both small and value, Big Value stocks are big and value, and Market Value includes all value stocks. Market Growth includes NYSE, AMEX, and NASDAQ stocks below the 30th percentile of the book-to-market equity ratio (B/M) for NYSE stocks. Small is the portfolio of all small stocks with no value tilt. The portfolios are value-weight (VW) and are reconstructed at the end of June each year. For each return horizon, the table shows average premium (Ave), standard deviation of premiums (Std), skewness (Skew) and kurtosis (Kurt), the percent of negative premiums (Neg), and percentiles of the distribution of premiums. The Monthly row in each block summarizes the distribution of actual monthly returns. Each of the remaining rows summarizes the distribution of returns produced by 100,000 simulations of returns for a particular horizon. The simulations allow for uncertainty about expected premiums.

---

Suggested Reading

---

The Secret To A Regret-Free Life

The Five Biggest Regrets And How To Avoid Them

By SJS Founder & CEO Scott Savage.

More than once in the many years since I started SJS, people have said to me, “Your life must be like a roller coaster ride. The markets are always going up, and then going down. It must be one wild ride.” Market fluctuations keep any investment firm on high alert, but the real ride for me in this business is something very different. For me, the ride is helping people worry less about their money and their futures so they can live their lives today.

I’ve always felt that one of the most important things SJS can do for its clients is strive to provide them with peace of mind. We are really in the freedom business when you stop and think about it. That concept hit home for me several weeks ago when I stumbled upon an article about the biggest regrets many people have when they reach the end of their life.

Bronnie Ware, a palliative caregiver who takes care of people with serious illnesses, shared the top regrets people often express at the ends of their lives.[1] In her position, she has been in the presence of countless people near death and the lessons are clear:

One of the main reasons I chose this career and started SJS Investment Services is that I find great meaning in helping others find and work on achieving their life’s purpose, and live their lives to the fullest. That means no regrets. What a wonderful thought!

It seems to me that we can all learn from Bronnie and the list of regrets she so often hears. It’s a great reminder for me of what my dad used to say: “We are all here on a rain check.” What he meant is that it’s up to each of us to cash in that check and not delay. Only we can make the choice to make the most of our time. So the question is – what are you waiting for? And, let us know how we can help.

---

Important Disclosure Information and Sources:

[1] “The Top Five Regrets of the Dying: A Life Transformed by the Dearly Departing.” Bronnie Ware, 2012, Hay House Inc.

Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.

---

Suggested Reading

---

Listening Pays Off

By SJS Founder & CEO Scott Savage.

Remember the old EF Hutton commercial? There’s a planeload of people and two businessmen are talking across the aisle. One of them casually says, “Well my broker is EF Hutton…,” and at that moment, everyone inside and outside of earshot leans into the conversation. The famous line, of course, was: “When EF Hutton talks, people listen.”

Well, at SJS we have a saying, too. Ours is:

“When our clients talk, we listen.”

A little different than EF Hutton’s, but it has a power all its own. Our best client relationships form not when we do a lot of talking, but when we do a lot of listening.

You may be thinking, “But SJS is an investment advisory firm. Shouldn’t you be doing more advising?” Great question, but advising without understanding seldom drives positive outcomes. Decades of experience have led us to the belief that, “People will tolerate the conclusions of others but act on their own.” Operating based on that premise, it is our job to help you arrive at favorable conclusions, in good times and even in times of stress.

By listening to you, understanding your needs and concerns along with your feelings, we can arrive at conclusions with you, rather than lobbing general financial advice at you – advice that you may not want to take, and even if you do, you may not stick to. As we’ve said many times, long-term discipline in investing is fundamental to MarketPlus Investing®. But it is also not something we often find in the industry. Perhaps the reason is too much advising and too little listening.

Why don’t more advisors take the time to listen? Maybe it’s because many advisors believe that they aren’t doing their jobs, aren’t truly advising, unless they themselves are doing the talking. But in our experience we arrive at our best advising outcomes through listening. Recently, I had a client meeting that lasted a full hour and forty-five minutes. I talked for a maximum of five minutes during that time. The client is in the midst of a life transition and confused about his next steps. He left our office feeling a lot better than when he arrived because he reached conclusions that made sense to him, and I was able to affirm those conclusions through the industry knowledge and experience of our firm and its people.

Another reason why some advisors don’t listen more is because listening takes time. It takes energy, and it takes a level of caring that we believe isn’t common in this industry. I wish it was more common actually because then more people – even those who aren’t SJS clients – might feel more positively about their investment experiences.

But there’s another benefit that listening delivers, and I often call it the best part of my job. Listening to you allows me to learn about your life and your story. Over the last 20-plus years, I have been enlightened, inspired and emboldened by the courage and achievements of our seemingly ordinary clients. You are far from ordinary and listening has provided me a front-row seat to your stories. To me, that’s the most valuable benefit of all.

---

Suggested Reading

---

Hope Is Not Our Strategy

By SJS Director of Institutional Investment Management Kirk Ludwig.

We all hope for things, every day. We hope for good weather, we hope traffic flows smoothly, we hope our favorite contestant will be named the winner on the latest TV talent competition. Hope is a part of human nature – a feeling, an emotion we all experience.

But there are plenty of situations where hope just isn’t enough. Hope may be a lot of things, but it is not an investment strategy. Sure, we hope that our investments allow us to save for our children’s college education, or purchase that vacation home, or retire comfortably. In this case “hope” means that we want our investments and planning to pay off so that we can do all the things that we invest for.

Hope – and fear – can affect the way investors evaluate alternatives. When markets are up, and everything seems to be going our way, feeling hopeful is easy. Hope can lead investors to think optimistically about the future, to ask the question: How good can it get? According to Hersh Shefrin in his book Beyond Greed and Fear, an investor who says, “I’m hoping for…” may be willing to accept more risk to reach that goal.

On the opposite side of hope is fear. These two feelings have a way of affecting our ability to make rational investment decisions. So, that same investor who had been feeling hopeful may now feel fearful, saying, “I’m afraid of …,” and may be less likely to take on more risk. (Hersh Shefrin, Beyond Greed and Fear, 2002.)

How emotions influence decision-making forms the basis of behavioral finance, which seeks to explain why investors may make irrational financial decisions. One concept that can affect investors is “hindsight bias,” which often occurs in situations where a person believes, after the fact, that some past event was predictable and completely obvious. Of course, in reality, the event could not have been anticipated. But the way we feel today is likely the result of what we’ve experienced in the past, and this will influence how we feel about the future. In financial markets, as in many other areas of life, a number of events seem obvious in hindsight. We’ve all heard the old saying, “Hindsight is 20/20.” Psychologists believe that hindsight bias allows us to believe that events are predictable to find order in our world. (Albert Phung, Behavioral Finance: Key Concepts, Investopedia.com.)

Advisors provide value by understanding these behavioral tendencies and helping clients guard against them. The advisor advises, adjusting portfolio risk to meet investor needs, not based on their level of hope or fear.

With MarketPlus Investing, we’re not “hoping” that a single stock will do better than the market, or “hoping” that an active fund manager will continue to outperform.

Instead, we’re using science and decades of research to guide us. (Dimensional Fund Advisors, Putting Financial Science to Work, February 2015.) MarketPlus investing is all about science and structure. We share the Nobel-prize winning investment philosophy of Eugene Fama of the University of Chicago, and other time-tested theories developed with his colleague, Kenneth French, of Dartmouth College.

MarketPlus Investing is based on four core fundamentals.

1. Markets are efficient and priced fairly.

2. Speculating is futile.

3. Global stocks and bonds have rewarded investors over the long term. History has proven this, especially for those who have a strategy and stick with it.

4. Portfolio design matters most.

Interestingly, not one of those fundamentals mentions “hope.” The financial industry has a way of selling hope, and playing on emotions. By relying on science and “controlling the controllables” to an extent, we can help put your mind at ease. A MarketPlus Investing portfolio is designed to best manage asset allocation, risk and tax implications for you – all while optimizing your expected return for the risk assumed. There are always factors we can’t control. But when we rely on what we know through science, we can reduce the anxiety felt when facing challenging markets, providing peace of mind without leaving things to “hope” or chance.

---

Suggested Reading

---