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Independent Advisor, October 2008

Independent Advisor
Re: “What’s Going On”                                                                                   October, 2008
Dear Friends of Keffer Financial Planning
With all the turmoil in the financial markets, I thought it might be timely to share some observations with you.  No, I do not claim to know what’s going to happen in the short term.  But there is ample historical evidence that those who maintain discipline, control their emotions, and continue to invest in their long-term asset allocations will prosper.
Here are a few thoughts about what’s positive out there:
Ø           Gas prices are trending downward ($3.73 to $2.92 in the last 30 days)
Ø           Stocks are cheap (trading at 72% of ‘fair value’ according to one Morningstar study)
Ø           It’s a great time to consider a Roth conversion (with less gain to be taxed)
It may not feel good, but it’s encouraging that the economy is purging itself of speculation that had artificially increased some asset prices.  And, hopefully we’ve seen the last of opaque financial instruments that masked their true risk.  We’ve all had an object lesson in the importance of diversification (glad you have those bond funds now?), the value of simple, straight-forward investments, like pure index funds, and the folly of reaching for higher returns with unclear risks
We now have the opportunity to model for those around us how vital it is to remain calm and focused on the basics, on the things we can control.  Here’s a short list of the best advice and clear thinking that I’ve read in recent weeks:
1.      Control the controllable.  Spending, saving, asset allocation and expenses are the elements that we can manage.  Market gyrations are not.
2.      Revisit long-term goals and priorities.  If retirement savings goals or withdrawal rates need to be adjusted, better to face it squarely right away.
3.      Review asset allocation.  If you believe your long-term risk tolerance is actually lower than you thought, consider making changes, but don’t try to time the market.
4.      Avoid useless, anxiety-provoking chatter.  By all means, stay informed.  But turn the TV off!  The pundits may be entertaining, but allowing Fox and CNN to assault your mental health with a constant barrage of doomsday headlines (while they grab for greater viewership) is decidedly not in your best interest.
I’ve personally been very disappointed in the Wall Street Journal over the past months.  A daily Journal reader since I started my MBA 20+ years ago (I was only 11), I had always admired their faithful avoidance of hype and histrionics.  One of the rare banner headlines I can recall off hand was on September 12, 2001.
No more the case under new ownership, we have such headlines pretty much every day now.  Granted times are exceptionally trying, but do journalists have no responsibility to avoid throwing fuel on the fire?
Enough of my ranting.  Thanks for letting me share what’s on my mind.  I’d love to hear what’s on yours.  Email me your feedback at
Best regards,
Bill Keffer

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