Tag

goals

What Makes the World Go ‘Round?

By | 2020, Money Moxie | No Comments

I ran my first half marathon in August of last year. I have never been much of a runner, but when the metabolism starts to slow down, you have got to do something. I chose to run.

Before last year, my distance record was 5 miles. That record had been in place since 2003, and I thought it would always stand. Now, here I am with, six half marathons under my belt and another four scheduled for later this year. I find crossing a finish line after pushing myself harder than I thought physically possible to be very rewarding. It makes me happy. But what does running have to do with finances?

It often appears as though the system in which we live is driven by money. It is so easy to get caught up in account balances, market returns, and investment news. We have all heard the saying, “Money makes the world go ‘round.” In today’s world, it is hard to disagree with that.

There is no question that money is essential. Money provides stability and opportunity. I have chosen to make a career out of helping people make wise financial decisions because I believe it is important. It is good to have money and the things it can buy, but what I value most in life, money can’t buy.

We talk with you a lot about money. We review your finances and performance on a regular basis. We talk about markets, the economy, and your investments. We build a financial plan and update it often. But the reason for all of this is not money. What is most important to us is that you live the life you truly want to live. We want you to achieve your goals, and we believe it is our job to help ensure money is never an excuse not to.

Recently I completed a short race with my 5-year-old daughter. After crossing the finish line with her and seeing her excitement and joy, I realized at that moment I could not be happier. Doing what I love, with those I love, is what makes me happiest. This was another reminder that life is too short, not to be happy.

What is it that you want to accomplish? What do you want to experience? What makes you happy? If you do not have answers to these questions, I challenge you to find them. Maybe it is to run a marathon or to visit another country; maybe it is to buy a new home or to pay the current home off. Whatever it is, we want to know about it. And if there is a financial component, we want to help you achieve it. Whatever your goals and dreams are, make sure they are the focus. Make sure they are what makes your world go ‘round.

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Happy New Year

By | 2020, Money Matters, Newsletter | No Comments

Making 2020 Count Financially 

I’m not one to harp on New Year’s Resolutions, but I do want to make sure you are aware of opportunities that will help you reach your financial goals. I thought I would share a couple of tips you may want to think about, possibly share with your friends and family, and implement for yourself.

Define your goals

From year-to-year, the top investments are going to rotate. We are often asked, “What should I invest in?” A better question may be, “What am I investing for?”  Defining a goal and then matching your investment strategy to that goal will help you stay on track. Keeping your focus on the goal rather than day-to-day movement in the market will help you manage the emotional side of investing. This is critical when market volatility increases.

Put investing on autopilot

We find that over time investors who have a systematic approach to saving are more consistent in their efforts. Waiting until the end of the week, the month, or the year before deciding to put money aside can diminish the urgency of saving and your ability to reach a goal. The 401(k) is a wonderful example; every pay cycle money goes directly into an investment for the future – automatically. Once you make the initial decision to contribute, no further action is required. The same can be done in an account outside of your retirement plan.

Increase contributions for 2020

If you are not making a maximum contribution to your 401(k), consider increasing the amount you will contribute this year, even if it’s a small increase. The limit for 2020 increased to $19,500. Often employees contribute only enough to get the employer’s full matching contribution – which is great! However, with fewer employers offering pension plans, the burden to save for retirement falls to the employees. Saving smaller amounts early on makes a significant difference in how much you will have when you get to retirement. If your employer doesn’t offer a 401(k), consider putting away up to $6,000 in an IRA or Roth IRA.

Make up for lost time

For anyone who will be 50 or older this year – there is at least one advantage – you can make up for lost time. The catch-up provision allows you to sock away additional money for the future. The 401(k) catch-up limit increased in 2020 to $6,500. For IRA and Roth IRA, the catch-up remains at $1,000.

Simplify your portfolio

It is not unusual to have several jobs throughout the course of your career. That being said, having multiple plans with past employers can be cumbersome and difficult to monitor. Consider consolidating these plans, making it more effective to track your investments, and determine if they are on track to help you reach your goals. 

We wish you a prosperous New Year!

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Your Values Matter

By | 2019, Money Matters | No Comments

When it comes to money, your values matter, why? If what you value most and your goals are not in alignment, you will experience a state of financial and emotional conflict. Your ideals and your actions will not match up, making it difficult to reach your goals.

Here’s an example of a value and a goal that would be in alignment. If family is important to you, then you value time spent together and want to take care of them. Your goal would be to protect your family financially if something should happen to you. Your actions might be to provide money to cover debts, pay for children’s college, replace your income, and provide end of life care. You would make saving for emergencies and retirement a priority, so you are prepared to live a dignified retirement, you would have legal documents and beneficiary designation in good order to protect your loved ones.

There is no right or wrong answer when it comes to personal values. They can be anything from Family, to Independence, to Education. There is no prerequisite to what you value; it is the culmination of your life experiences, education, and beliefs. The trick is which values are most important.

What are your top 5 values? You may be able to name two or three right off. Then you may go into a stupor, wondering “What else do I value”? Sometimes it is not easy to identify our top 5; it takes time and thought. If you find yourself stumped let me know; I can help.

Your decisions and actions have the most significant impact when it comes to reaching your goals. They have more to do with your financial success than the market or the investments you choose.

That’s why your values matter!

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Is Your Heart Making the Decision?

By | 2019, Money Matters, Newsletter | No Comments

Women generally have huge hearts and can sometimes let their hearts lead their financial decisions. Even the most educated and most successful women can let their hearts influence their financial decisions. Here are some examples of how women may be dealing with financial situations:

–    Children ask for money for the latest thing(s), and mothers usually say yes. When mothers spend too much money on their children, they may not be saving enough for retirement.

–    Women who allow their husbands to handle every aspect of financial decisions may find themselves in crisis when a spouse is injured, they are divorced or widowed and discover they are unprepared to manage all facets of their financial life.

–    Single women – those who never marry or who are divorced – are often uncomfortable with finances and may even be bored with financial matters. Still, they are anxious about being financially secure now and in the future.

As women, we need to take control of our financial life and be honest with ourselves and others in our relationships.  We are generous with our love, time and money and we shouldn’t stop being kind, generous people, but we must be sure that our acts of generosity are not depleting our financial future and retirement plans.  We must learn to say “NO” out of love, not out of fear. If you pay for a child’s college education, will it jeopardize your future retirement? This act of generosity could potentially create financial stress for years into the future. Your act of charity should never put you at financial risk.

Women need to set financial limits. Our goal should be to raise financially independent, successful children. While it may seem reasonable to help a family member, continuing to pay expenses for grown children will not help them become financially successful adults. It might feel like tough love, but in the big picture, it truly helps everyone. 

Make financial decisions that support your financial goals and secure your financial future by taking time to think through the situation and process the outcome. Lead with your head, not your heart. Being financially smart will help you secure your goals and achieve financial success.

If you are faced with a decision and need additional information or maybe just a sounding board, reach out to us and let us help you think through your options. Together we can find the right solution for you.

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A Lesson from the Decathlon Gold Medalist

By | 2016, Executive Message, Money Moxie, Newsletter | No Comments

Greetings Dear Friends and Financial Partners,

During this year’s Summer Games, I watched an interview with Ashton Eaton. At the time of the interview, Eaton was the reigning Gold Medalist and world-record holder in the decathlon from 2012. Eaton stated that he had a different mindset today than he had four years ago.

Eaton said his main goal four years ago was just to be there at the Summer Games. To get there, he did everything right physically. He was ready to go.

During the last four years, Eaton believed he had become smarter. This time around Eaton focused on preparing himself for all of the things he would not be able to control—the unknowable. He didn’t want to be surprised. As a result of his efforts, Ashton Eaton once again became the Gold Medalist by winning the decathlon competition in 2016.

What can we learn and how can we benefit from the paradigm shift in Eaton’s mindset?

Eaton’s 2012 training can be compared to our retirement planning. In our preparation we may focus on a financial number and like Eaton we may just be glad to be there. However, retirement is really just the starting line of another race—a race that may be different than what we expected.

There will certainly be unexpected expenses and unforeseen health challenges. Your investments will rise and fall daily in the commotion of the financial markets. How can you manage your assets in a world with so many things you cannot anticipate, let alone control?

Your investment results may ultimately be determined by how you psychologically prepare for the ups and downs of the market. It’s not the stock-market action that you should worry about. It’s your reaction to what’s happening!

At SFS, we can help you identify unforeseen events that may impact your financial well-being. We will create a plan that will help protect your assets and create an income designed to last throughout your retirement years. When the unexpected happens, you can feel confident. You have prepared. Call us.

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

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Uncover Your Creative Genius to Find Fulfillment

By | 2016, Money Moxie, Newsletter | No Comments

At a young age, Erik Wahl was told by an elementary teacher that art “just wasn’t his thing.” He colored too fast and was not able to stay in the lines. His teacher’s assessment is hard to believe, especially when seeing him in action creating art on stage in front of an audience. He is amazingly talented.

Erik Wahl - Peyton Manning

Erik is a well-known graffiti artist, motivational speaker, author, and entrepreneur. While on stage, he inspires his audience to look beyond the limitations they and others have imposed, and search inside for their creative genius. Something that he advocates we all possess in some form.

In his mid-30’s, Erik discovered his artistic creativity. With a college education and successful corporate career, Erik was living the American dream. However, the dot.com bubble and subsequent economic downturn brought things to a screeching halt. In Erik’s words, “I lost everything: my money, my investments, my security, my identity.” He found himself without a job and in financial ruin. As he struggled to gain control of his circumstances, he was told to get away from things for a while and do something to help clear his mind – travel or take up painting. With no money to travel, Erik took up painting and the rest is history.

Erik advocates that we all have creative genius. The challenge is to break out of the box that acts as a ceiling on our potential. Often we think of creativity as art. In reality creativity is following your heart, acting on your convictions, and finding passion in what you daily.

If you were to ask a room full of five-year olds which was a good artist, it’s likely all of their hands would shoot up. Asking the same question in a room of adults delivers a much different result. There may be only one brave soul to raise a hand. Over the years, our idea of creative ability becomes skewed and we make unrealistic comparisons. The group of adults are probably comparing themselves to Picasso and believing they fall short. While we may not be Picasso, everyone has some creative talent. It could be that you are a good communicator, or perhaps you think outside the box and find solutions to problems that others had not considered. In both cases, you are using your creative ability.

Applying Erik’s philosophy can help inspire us to live life more fully and enjoy greater success. Regardless of the stage of life we are in – just starting out, raising a family, building a career, or crossing the bridge to retirement – using creativity will help make the journey enjoyable and more fulfilling. Too often we think in black and white, left brain or right brain. The truth is there are two sides to our brain and using both delivers a better outcome. Combining mind and heart, logic and emotion, strategy and soul can deliver powerful results.

Erik is a great example of the principles he promotes. He inspires others by opening their minds to possibilities that most have not considered. He helps others find greater fulfillment daily by bringing passion to all they do. He gives back to the community in his unique way. Erik does not sell the art he creates on stage nor can you commission him to create a painting; rather he champions charities by donating his work. At the conference, where we heard Erik speak, he created several paintings while we watched in amazement. This painting of Peyton Manning was given to Securities America to be auctioned for charity. The painting subsequently sold at auction for $5,500 and the proceeds benefited the Juvenile Diabetes Research Foundation.

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Need Help Allocating Your 401(k)?

By | 2014, Money Moxie, Newsletter | No Comments

One of the most common questions we get at SFS is “How should I invest my 401(k)?” This is a critical question, especially considering that 18% of retirement assets are tied up in these accounts (source: Investment Company Institute). Managing your 401(k) may be the most important place to place your financial focus after managing your spending.

First things first—start saving now. Starting early is the best way to get compounding rates of return to work in your favor. Remember, Albert Einstein called compounding rates of return the “8th wonder of the world.”

Next, take advantage of free money by getting the full match your employer offers. Not all 401(k) plans include a match, but if yours does, then make sure you get the full benefit. The rate at which you save is far more important than the rate of return you get. So, keep saving for the future.

Now let’s get into the investing nitty-gritty. Every person must decide how much risk to take in his or her savings. Your risk tolerance should be based on your ability, willingness, and possibly your need to take risk. It will be different than that of your friends and coworkers. It may even be different than that of your spouse.

Your ability to take risk includes factors like your overall financial situation and your time horizon. The more savings you have, the more risk you can take. The longer you plan to invest, the more risk you can take. Why? Your chances of positive returns in stocks go up the longer you invest.

Willingness to take risk is more difficult to determine. The essential question is how well will you be able to handle a drop in the value of your investments? If you view a fall in the stock market as an opportunity to buy more then you may have a high tolerance for risk.

When it comes to picking investments, the easiest route is to find an investment that approximates your retirement date. These all-in-one solutions provide some diversification. While diversification is far from a guarantee, it is still a good way to help manage risk. The pitfall of the retirement date choices is that these don’t take into account your personal situation (health, income, assets, debt, etc.) and they may not even disclose exactly how they are invested.

If you choose to select your own mix, be careful. Selecting the hottest performer last year can get you in a lot of trouble. Distributing your account balance evenly into each option is certainly not the way to go either.

This is where a little research and help from a professional can help. Give us a call. We can help you navigate the 401(k) maze.

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What’s Your Happiness Index?

By | 2014, Money Moxie, Newsletter | No Comments

We have all heard the adage “Keeping up with the Joneses.” For many, this adage reflects a perception of happiness – seeing what others have and believing it creates an abundance of happiness in their lives. In reality, the desire to have more often results in less satisfaction.

When asked, most people would say if they had $_______ more (you can fill in the blank), they would be better off, financially speaking. It’s hard for most Americans to believe someone earning a handsome six figure income, say $400,000, can feel broke. But it happens.

This “getting ahead” mentality occurs at all income levels and generally has the same effect. As our income increases, even slightly, we think: “How can I spend this additional money?” More often than not, the answer is a purchase. Maybe it’s upsizing your home, moving to a better neighborhood, getting a new car, or buying a recreational toy. There is no limit to the human desire to have more.

We’d like to introduce a new idea. Perhaps getting ahead doesn’t mean buying more stuff. After all, what exactly are we getting ahead of? Contentment and happiness come when we are comfortable living within our means.

happiness

Financial Freedom
Debt does not create freedom. The treadmill of borrowing more money to buy more stuff gets tiresome and stressful. We become so focused on finding a way to pay for our lifestyle we seldom really live in and enjoy the present. Freedom comes from having enough discretionary income to cover the unexpected curve balls life can throw your way. Discretionary income provides the flexibility to slow down and enjoy the life we are living and the lifestyle we are striving to create.
Contentment Creates Happiness
This in no way implies that we shouldn’t strive to improve our lives and better our circumstances. The point we are trying to make is that using someone else’s lifestyle as a measuring stick for our personal happiness generally has the opposite effect. If we never feel we measure up financially, we’re going to be hard pressed to feel happy or content. Setting realistic expectations and balancing wants and needs is a starting point.

From there we must break down our income to first cover non-discretionary needs. This would be a roof over head, food on the table, electricity, etc. Then we prioritize wants and determine how to use current resources to cover these items. At the end, there should be discretionary money that is not appointed to any specific goal, other than creating excess cash – savings.

The Happiness Index
Balancing our wants with the ability to pay for them is a challenge. There have to be trade-offs. Buying the newest high-end luxury car may result in a high level of debt. On the other hand, a beat up jalopy with high miles may not last long. The idea is to purchase a vehicle that meets your needs and that you can reasonably afford. That way you feel good about the purchase and still have some cash flow flexibility. This decision making process is your happiness index.

Each time you spend a large amount of money or commit monthly cash flow to an ongoing expense, ask yourself, “How will this financial transaction impact my happiness?” Applying this technique will help set you on a positive financial course. In the words of author Mitch Anthony: “Be content with what you have right now. If you can’t enjoy it now, you won’t enjoy something
better later.”

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6 Mistakes Could Send You Over The Retirement Cliff

By | 2014, Newsletter | No Comments

Retirement is a balancing act. It’s like a person walking on top of a wall. On one side is a cliff with a pool full of sharks. On the other side is a white sandy beach surrounded by blue water and a cabana set up waiting for you with a tall glass of lemonade. If you make a big mistake with your money in retirement, you can find yourself being eaten alive. If you are wise with your money, you can find more comfort and relaxation. Below are six critical mistakes that have the potential to devastate a retirement plan.

Lack of communication
You need to communicate your expectations for retirement and what it looks like. Discuss how much money you will need in order to accomplish all of the activities you want to do: travel, home remodeling, etc. Know what money is intended for major expenses and what money is intended for monthly living expenses. If you spend too much on large one-time expenses, you may seriously jeopardize your monthly income.

No measuring stick
Many retirees have no way of knowing if their money will last through retirement. In part, this is because they are not using a measuring stick. As a general rule of thumb, you should not spend more than 4 percent of your retirement assets per year. Another good benchmark is a 4-year checkup. After 4 years of retirement, if you have more money than what you started with, you should be on the right track. At Smedley Financial we use an elegant system that tracks yearly progress and lets you know whether you are going to outlive your money.

No spending plan
Too many people spend more than they should and don’t realize it until it is too late. Once they realize the mistake, they have to dramatically change their lifestyle. You should create and live by a monthly spending plan. When looking at potential expenses, evaluate how they will affect your goals. For example, helping out children can be one of your goals, but it might compete with your needs for security and independence. It is usually the hard decisions like this that seriously harm a retirement plan. With children, set clear and simple boundaries. Explain that you are taking care of yourself so they won’t have to.

Investing extremes
Many people believe that at retirement they should put their money in the bank. Others feel they need to make up for lost time and invest aggressively. Both approaches have problems. Conservative investors often underestimate the negative impact of inflation over time. You may be in retirement for 30 or 40 years. Conversely, overly aggressive investors may lose their shirts as evidenced by the recession of 2008-2009. To address these issues, take a balanced approach that doesn’t have you investing at the extremes.

No plan B
Most people assume that bad things happen to others. We realize bad things can happen to us as well, but often act as if we are willing to play the odds that it won’t. Consider this sobering fact: at age 65, a typical married couple in good health can expect to spend $260,000 on healthcare costs during their remaining lifetimes. Have a plan B in place to cover unforeseen expenses like long-term care costs, medical expenses, and home repairs that are not covered by insurance.

Falling for a scam
As always, if it seems “too good to be true” it probably is. On April 30, 2014, the Securities and Exchange Commission (SEC) halted an IRA scam in Utah that cost investors $22 million. The company had been “paying” 12 percent on paper, but when investors tried to get their money back they were given the runaround. As with most scams, it is unlikely they will recover their money. Look out for red flags. Don’t jump in just because somebody promises great returns. Look for a track record for the product and for the company. Even if the investment seems like it is on the up-and-up, it may be a good practice to dip your toe in the water before you jump in with both feet.

Retirees get into financial trouble in dozens of ways. If you feel like you are being eaten by sharks, don’t despair. Seek out a trusted professional at Smedley Financial to help get you back on track. If you have managed to avoid these six common mistakes, give yourself a pat on the back, sit down in your private cabana looking at the crystal blue water, sip some lemonade, and enjoy the beauty of retirement.

 

  1. http://money.cnn.com/2007/08/13/pf/expert/expert.moneymag/
  2. http://www.retirementoptimizer.com/
  3. Center for Retirement Research at Boston College, “What is the Distribution of Lifetime Health Care Costs at age 65?” March 2010
  4. http://www.thinkadvisor.com/2014/04/30/sec-halts-ira-scam-that-cost-investors-22-million
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The Ultimate Marathon: Retirement

By | 2013, Money Moxie, Newsletter | No Comments

Top notch athletes have something in common. Each possesses a strong commitment to endure to the end. Marathon runners spend countless hours working towards a single goal–completing the 26.2 mile run at marathon pace. When accomplished, many begin preparing for the next marathon.

Richard J. Carling personifies a top notch marathon competitor. He began running at age 39, for health reasons, and at age 75 he’s still going strong.  He runs four marathons every year.

In October, Richard will be running in the St. George Marathon, his 145th marathon. I asked Richard how he got started. He said, “Before I started running, I didn’t think I needed a plan to stay healthy, I thought I was fine.” After his health scare he was told he needed to do something and running was recommended. Now he has a plan and a strategy, which he follows to stay healthy and compete in marathons.

A runner’s journey begins with an assessment. Fitness level, personal needs, and race terrain become the basis on which their training program is built. If these areas are not addressed, the runner will have little chance of reaching the goal. For instance, someone with a physical ailment must take precautions to protect themselves from injury. Someone who will be competing at a high elevation, like the Colorado Rockies, must do more than train at sea level. The key is that each training plan is very personalized to the athlete and the goal.

Planning for retirement begins much the same way. First you must determine what it is you want to accomplish. Is your desire to retire at a certain age, or is it more important to maintain a certain standard of living throughout retirement? Once you’ve made your decisions, there must be a strong commitment to reach those goals.

Self-assessment is important when building your plan. If this step is missed, you may find that you are not able to stick to your long-term plan. Think about this, if you invest in something with considerable volatility when emotionally you can tolerate little risk, you are more likely to abandon your plan. On the other hand, you will be disappointed and fall short of your goal if you were expecting market returns over many years but were invested too conservatively.

If you want to run for a lifetime, as Richard has, he says, “You must stay within your limits. This will help keep you healthy and prevent injuries.” Consistency is important. Richard runs 8 miles each weekday and tries to get 20 miles in on Saturday. He says, “If you over train or push yourself too hard, you will have to make adjustments that can set you back in your training.”

Marathon runners, in general, train by running long distances to increase stamina and endurance. They are not running sprints to get ready for the race, nor will they be sprinting during the race. The distance of each run is carefully planned out so that they peak on the day of the marathon.

This same practice is applied to retirement planning. Your plan must be well thought out. What types of investments will best help you reach your goals? My guess is that there will be some investments that are more conservative to provide for your needs as you begin retirement. From there the investment risk may increase based on when the assets will be converted into income. While this may seem obvious, many miss this point entirely. Their plan becomes fluid and investments are made based on the heat of the moment; the well thought out plan is abandoned. Market timing becomes the basis of the investment plan.

Dalbar Inc. released a study on March 26, 2013, regarding investor behavior. The study reveals how emotional, short-term decisions have stunted the performance of equity investors.  In a nutshell, the study shows that over the past 20 years, investors have under performed the market by an average of 3.96 percent per year. When compounded over 20 years, the difference becomes a chasm separating you from your dreams.

The gap in returns can be attributed to bad investment habits. The most common error is chasing performance by purchasing the hottest investments. In other words, investors are often their own Achilles heel.

Endurance, both physical and mental, is essential to a marathon runner. Without it an athlete would fall victim to the overwhelming urge to quit. During the 26.2 miles, the runner’s courage and determination are tested. When asked how he’s able to run such long distances, Richard says, “Everyone hits a wall at around 20 miles. At that point it’s all mental. You don’t worry about the past or the future. You stick with your plan. If you get excited and try to push too hard you’ll crash.” In order to endure, the will must remain stronger than the body.

Along the path to retirement there will be many obstacles. The endurance test will be a matter of commitment and will. If your plan is well thought out, market volatility in the short-term should have little impact on the long-term results of the plan.

If you are committed to following your plan and have the will to succeed, you can protect yourself from financial elements that arise. If you understand that taking a large distribution at the wrong time will jeopardize your plan, you will be less likely to make bad loans to others.

After completing the St. George Marathon, Richard looks forward to running the Honolulu Marathon and then the Boston Marathon where he is 10th overall for running the most consecutive marathons. While he is always focused on the race at hand, when that race is completed, he is looking forward and mapping out a plan for his next race. Go Richard!

Getting to retirement is just one step in the long-term retirement plan. Making sure that your assets allow you to continue your lifestyle throughout your retirement years requires additional sophisticated planning. There will be a whole new set of financial elements, and adjustments may be necessary for this part of the race.

Your plan to access your income must address a different set of personal needs. Those that will require continued commitment in an effort to reach the ultimate goal– financial security in retirement.

 

*The S&P 500 is an index often used to represent the market. One cannot invest directly in an index. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Data provided by Dalbar Inc.

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