W. Swartz & Co. Insights

Here you will find the firm's thoughts and perspectives on a range of topics including current market conditions, investment philosophy, and financial planning principles.

Posted by Wyatt on October 2, 2017

Market Conditions Update – Oct 2nd, 2017

With 3Q17 officially in the books let’s take a look at where the markets stand. Coming into the week, as of Monday October 2nd US Stocks as measured by the S&P 500 were at +14.24% YTD, trailing their international developed and emerging counterparts thus far. International developed stocks as measured by the MSCI EAFE are at +20.47% YTD, and emerging markets are at +28.14% YTD as measured by the MSCI EM.
Stocks do not look irrationally overbought in historical terms. US stocks are slightly about their long-term averages with a forward P/E of $17.70, and international stocks are below their long-term averages. International developed stocks have a forward P/E of $14.76 and emerging market stocks have a forward P/E of $12.51.
Growth & Profits
The final estimate for US 2Q growth is 3.1% annual rate which is the quickest pace in more than two years. US companies are showing 18.6% year-over-year operating EPS growth based on 2Q reporting.
The US economy added 156,000 jobs in August and the unemployment rate rose to 4.4%. Production and nonsupervisory wages rose 2.3% year-over-year, slower than the previous month.
Inflation & Rates
August data is showing core inflation as flat year-over-year. While additional rate hikes may be temporarily delayed, the Fed explicitly announced its intention to begin the balance sheet normalization in October. The plan is for the Fed to decrease holdings of Treasuries and mortgage-backed securities by up to $10B in total per month in the 1st quarter of implementation with an additional $10B increase each quarter thereafter. Ultimately decreasing holdings by $50B by the 5th quarter of implementation.
Thus far the expected return of volatility in the markets in 2017 has failed to materialize. Stocks have continued a seemingly unshakable climb upward over the course of the year. Asked to explain this, I read somewhere a “market expert” describe the environment simply as “it’s a bull market.” This was a solid take, and it is likely to remain one until the something unforeseen comes along to knock things off course or it runs out of steam. It seems unlikely for the bull to run out of steam right now given low probabilities for global economic recession, continued economic and corporate growth and generally attractive valuations. Especially in international markets where valuations are cheap in relative terms and growth appears to be increasing.
– Wyatt Swartz
– 10/2/2017
Posted by Wyatt on September 25, 2017

What are the risks associated with a Roth IRA? (Investopedia Adviser Insights)

The post can be viewed on Investopedia here.
Question Headline:
What are the risks associated with a Roth IRA?
Question Body:
Your Answer:
There are 3 primary risks associated with an IRA.
  1. Poor Investment Choice Risk
  • Presumably funds within a Roth IRA are being invested in market traded securities such as stocks, bonds, mutual funds, REITs, and ETFs. Investing in market traded securities always includes the risk of loss of principle. Investing funds within a Roth IRA or another account requires the investor to have the right mix of securities based on their goals, time horizon, and cash flow needs from the portfolio.
  1. Changes in Investor Circumstances
  • Funds invested within a Roth IRA grow tax-free and distributions in retirement (after age 59 ½) are also tax-free. These great features come with restrictions, specifically the accounts are meant for retirement savings. An investor that has a change in circumstances that needs to access their funds prior to retirement (age 59 ½) may face penalties and taxes.
  1. Opportunity Cost Risks
  • With any investment, there is always the risk of “missing out” on some other better investment, this is called opportunity cost risk. Investor capital that is allocated in a Roth IRA cannot be put towards other investment vehicles which ultimately might have proven more beneficial.


– Wyatt Swartz
– 9/25/17


Posted by Wyatt on August 29, 2017

Bear Bryant Quote

Have a plan. Follow the plan, and you’ll be surprised how successful you can be. Most people don’t have a plan. That’s why it’s easy to beat most folks. 

— Bear Bryant

Posted by Wyatt on July 27, 2017

What is an annuity? (Investopedia Question)

 The Advisor Insights question and answers can be found on Investopedia here.
Question Headline:
What is an annuity?
An annuity is a sum of cash invested to produce a flow of money for a fixed period. To simplify, an annuity is money invested with an agent or broker, that grows over time. The owner of the annuity will receive payments from the annuity company for a period of time, typically for life. There are two types of annuities, immediate or deferred annuities. An immediate annuity is when someone makes an initial  principle payment and begins receiving a fixed payment for life, immediately. With a deferred annuity, the investor doesn’t start receiving payments until a later, specified date, determined by the investor.  Annuities are tax deferred, making this investing vehicle important for people looking to save for retirement. There is often a conflict of interest between investors and agents concerning annuities. Agents/brokers selling annuities are paid commission at the point of sale, which tends to encourage the agent to sell annuities even if they are not appropriate for the investor. The lack of liquidity is also a downfall. If people are in a bind for money and their money is in an annuity, they could face penalties for having to withdraw their money early. Annuities are taxed at the ordinary income tax rate, and not the lower long-term capital gains rate like most investments. In summary, there are unique situations where annuities can be useful, however in most circumstances there are better investment options which provide better returns and more liquidity to investors.
– Wyatt Swartz
– Contributions by Caitlin Lammers
– 7/19/2017
Posted by Wyatt on July 25, 2017

What’s the difference between a 401(k) and a pension plan? (Investopedia Question)

The Advisor Insights question and answers can be found on Investopedia here.
Question Headline:
What’s the difference between a 401(k) and a pension plan?
A 401(k) and a pension plan are both retirement plans set up between an employee and employer. The main difference is that a 401(k) is a defined-contribution plan, while a pension plan is a defined-benefit plan. What does this mean? A defined-contribution plan means that the amount of money in the 401(k) is dependent on how much the employee contributions to the plan, and the performance of the investment vehicles. These plans are tax deferred, and employees have an $18,000 contribution limit, unless they are 50 years or older. The employer is not required to contribute to a 401(k) plan, however they often do match a percentage of what the employee invests into the plan. With a defined-benefit plan, the employer is required to provide a specific amount of money to the employee once they begin retirement. This amount is fixed, and independent of how the investment vehicle performs. There are number of factors that determine what the fixed dollar amount owed to the employee upon retirement is. Employees can contribute to these plans as well. Pension plans are also tax deferred, and provide a tax break for employers when contributing.
– Wyatt Swartz
– Contributions by Caitlin Lammers
– 7/3/2017