Market correction of 30-50% in next 10 years – to occur at least once or maybe twice, reports Jack Bogle of Vanguard Group
Boston, MA (PRWEB) October 14, 2014
We like to evaluate our clients’ exposure to the financial
markets and show them how they can minimize their risks while still 6, 7, or 8% with half the market risk- beta of .3-.5.
According to ABC News, experts and are predicting a great deal of volatility as the International Monetary Fund trimmed its outlook for global growth this year and next (1). The freefalling securities of the Dow Jones Industrial Average (DJIA) in mid-September were countered by a brief recovery followed by a few days of fluctuations, only to be capped by a sharp drop on the last day of the month. The closely followed index then rebounded strongly in just one trading session and then plunged into a new period of fluctuation. Although the DJIA had experienced an even sharper drop in late July and early August, many economists and market analysts believe that the ongoing market correction could easily mature into a sluggish bear market (2).
In April 2013, one of the most respected names in investment banking called attention to the financial
markets as he predicted a rocky decade for stock investors. Jack Bogle, the senior chairman and founder of the Vanguard Group, appeared on CNBC and issued a somber outlook with regard to the global financial exchanges: A market correction between 30 and 50 percent was clearly on the horizon at least once, and perhaps twice in the next 10 years (3).
While Mr. Bogle did not appear to be overly concerned with his 2013 prediction, market corrections tend to spell undue risk and significant losses for the average investor. Mr. Bogle explained that he has survived market corrections of 50 percent, once in 1971, three decades later in 2001, and just a few years ago in late 2008 (3). One of the major reasons why Mr. Bogle is not so concerned with a possible market correction is because he believes in efficient fund management and not in market timing.
The market correction sentiment is not limited to stocks. Marc Faber, a renowned fund manager and professor at the prestigious Wharton School of Business, sees asset bubbles everywhere. Speaking to CNBC on September 19th, Mr. Faber warned that market corrections tend to follow financial bubbles (4). Mr. Faber also sees potential catalysts of these corrections, which include rising interest rates, a strong dollar, and a downbeat bond market.
Faber and Bogle are not the only ones urging caution with regard to significant market corrections. Billionaire investor George Soros has recently commented on his belief about an imminent 10 to 20 percent market correction (5). These financial wizards share more in common than a gloomy outlook: They have been able to weather out market corrections while delivering returns on the portfolios they manage, and they have accomplished this by serving their clients and not by “beating the market.”
Marketing correction: Panic, Buy, or Sell?
Rocco Beatrice, Managing Director of Estate Street Partners, LLC, shares a similar sentiment with Bogle, Faber and Soros. Estate Street Partners owns and operates UltraTrust.com, a website that teaches clients about efficient asset protection and wealth management practices. With regard to market corrections and how they can impact portfolios, Mr. Beatrice explains that: “We like to evaluate our clients’ exposure to the financial markets and show them how they can minimize their risks while still maintaining solid returns. Most of our clients cannot afford to lose 30 to 40 percent in the market because they are too close to retirement.”
Expanding on the above, Mr. Beatrice adds: “Most of our solutions were through extensive research of only the top 1% of fund managers. What makes them different is they offer 100 percent liquidity and a tactical strategy that resulted in no losses in the 2001, 2008, 2009, and 2011 stock market crashes. We typically gather basic information from our clients including brokerage statements and their latest tax
returns, and from those we can show them where hidden risks lie, how they can generate tax free income, and how to avoid 30 to 40 percent declines while surpassing their expectations on returns without the implied volatility.”
Mr. Beatrice believes that the investment management industry at large does not pay too much attention to bear market forecasts such as those issued by Bogle, Faber and Soros: “The practice of putting investors’ funds into products that are supposed to outperform is very suspect at this time. Money managers are seeing that these products simply not performing as they hope; this is not how active fund management is supposed to work. The market correction forecasters are doing what is right for their clients, which is to protect their assets at a time when everyone else is losing them.”
In closing, Mr. Beatrice highlights some of the principles of wealth management observed by Estate Street Partners and UltraTrust.com: “We essentially begin with our clients’ personal financial history and their responsibilities before going into realistic objectives. The goals will differ, but the most common ones tend to be income, wealth protection, estate planning, and time horizon. What ties all these factors together is risk mitigation. Once we establish one or two strategies to ensure that our clients are able to withstand market corrections, producing returns becomes a lot easier. We discover and create value, which is not something that can only be accomplished with proper fund management. Algorithms and esoteric trading should never be a part of a sound wealth management strategy.”
About Estate Street Partners (UltraTrust.com):
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