Emotion + Investing = Costly Combo

We’ve been riding a nice wave the past several years now – one of the biggest bull runs since the Great Depression. That has a lot of people getting excited about equities and piling in. Unfortunately, many have missed a roughly 130% run-up of the S&P 500, since early 2009.

What is worse, many of these people got out of the market in late 2008 / early 2009, when values were terribly depressed. Hundreds of billions of dollars were yanked out of the equity market during this time. Why do we do this over and over, cycle after cycle? Emotions.

“In bear markets, it's fear and panic that take over, and the stomach overrules the head. Stomachs rarely make good decisions.” –Larry Swedroe

Read that quote recently, and love it – a great point to remember when (not if) the next bear market comes along. Bear markets should be viewed as an opportunity to purchase quality merchandise on sale. This all leads to my point: Without commitment to a plan of attack for our investment dollars, we are left to act on emotions. A well-designed plan for your situation should take into account the timing of your likely cash needs, and accommodate your specific risk tolerance or aversion to it. A well-thought-out plan will allow your portfolio to take advantage of market fluctuations, instead of running with the crowd, chasing returns that are already history. 

Dallas - Big Things Happen Here?

So back in October of 2012, our city unveiled its new logo, with the slogan “Big Things Happen Here.” At first I thought, “Man, that is kind of braggadocious of us to claim this so boldly.” Visions of Jason Terry tattooing his arm with the Larry O’Brien trophy and guaranteeing an NBA championship before the Mavericks magical 2011 title run come to mind. But, much like JET’s bold claim, I also think this one will continue to be true for the city of Dallas.

Let me tell you why.

1) Proof is in the pudding. According to the U.S. Census Bureau from July 1, 2011 to July 1, 2012, more than 361 people PER DAY moved to the DFW metroplex. Crazy. No other metro in the grand ol' U.S. can top that, period. People go to where things are awesome. Sure, all those peeps didn't move to Dallas proper, but Dallas County added more people than any other county in the region, and our county is named after our city, again, because it is awesome.

2) While not Silicon Valley (yet), our startup community is legit. We have more people like Michael Walsh moving here every single day. We have multiple startup accelerators, including Tech Wildcatters and Pipeline at BioCenter, along with Launch DFW – an online community to help connect the dots.

3) Best city in the U.S. for good jobs? You guessed it: DALLAS. I didn't make this up, Forbes did. They have good reasons too.

2013 Tax Brackets and Retirement Contribution Limits

With the political wrangling that took place at the first of the year, we wanted to pass along some basic tax information that is now in place. Below you will find the new income tax brackets, some basic new tax rules, and the new retirement account contribution limits for 2013.

2013 Federal Income Tax Brackets

Marginal Tax Rate	Married Filing Jointly	Single
10%	$17,850 and less	$8,925 and less
15%	$17,851 – $72,500	$8,926 – $36,250
25%	$72,501 – $146,400	$36,251 – $87,850
28%	$146,401 – $223,050	$87,851 – $183,250
33%	$223,051 – $398,350	$183,251 – $398,350
35%	$398,351 – $450,000	$398,351 – $400,000
39.6%	$450,001 and higher	$400,001 and higher

New Tax Basics for 2013

• Long-term capital gains and dividends taxed at 0% for the first two brackets, 20% for the top bracket, and remain at 15% for everyone else
• Payroll tax returns to 6.2%, from 4.2%, for everyone
• Medicare withholdings increase 0.9% for amounts over $250K married ($200K single)
• Additional 3.8% surtax on investment income for those with AGI over $250K married ($200K single)

Tips for an Approaching Retirement

The best time to plan for and attempt to secure your retirement is before you retire, not after. That being said, it's never (well, almost never) too late to get your ducks in a row. Below you will see a list of helpful items to consider prior to becoming a retiree.

1. Put plans to paper. You may have an idea of what you want to do in retirement, but force yourself to be realistic and put your wants, plans, and desires on paper. This is particularly crucial if you are married. What you may have discussed with your spouse 5 years ago may not be what you or they want as of today. We are human, and we tend to change our minds. Writing down what you want will allow everyone to clearly be on the same page ... or will invite a conversation to allow that "meeting of the minds" to occur. These plans should be revisited regularly (at least yearly), as they may need adjusting from time to time.
2. Ensure investment allocation is appropriate. Most would agree that it is prudent to become more conservative as we approach retirement. At a 30,000-foot view, this typically means shifting investments from equity (stocks) to fixed income (bonds or bond funds). We need to keep in mind that even in retirement, we should have balance. Ideally, you won't need to touch a decent portion of your investments for 10 to 20+ years after retirement. This portion can, and I would argue should, be more aggressive, as there are many years to weather market fluctuations and potentially benefit from higher growth rates. That being said, you do need cash for immediate/near-term use and fixed income for stability and income generation. What mix is best for you will depend on the size of your nest egg, your temperament, and your retirement withdrawal plans.