Three steps to successful - Waterford Advisors
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First Quarter
Newsletter April 2021
Three steps to successful
I N V E S T I N G
Every once in a while, it’s useful GOALS. Under this heading, we
to step back from the permanent have two critical questions to answer.
chaos of political, economic and First, what are we investing for?
market events, and ask ourselves Most of us, I think, are accumulating
the fundamental questions: what am Gregory L. Kozerski capital for retirement, and beyond
CPA, CFP ®, AIFA®
I investing for, and how will I know President that for legacy. For the sake of focus,
whether I’m succeeding or not? How, let’s leave legacy out of the equation
indeed, does one even measure for the moment—because if we don’t
investment success? get retirement right, chances are
The answers will be found not in there won’t actually be any legacy.
today’s headlines—and certainly not and out of the market opportunely. Thus, the threshold financial issue in
by attempting to predict tomorrow’s. Considered properly, all portfolio retirement is simply will we outlive
Nor will they be a function of whether issues are subordinate to the two our money, or will our money
the market’s next 20% move is up or vastly more important questions: outlive us?
down. You see, the answers you’re (1) Have you set specific goals? The second and more specific
looking for can only be discovered And (2) Do you have a specific plan question then becomes: how much
by the light of your own personal for achieving those goals in the is enough? That is, what will our
financial situation. In practice, time allotted? (for most of us, that income need in retirement be, and
they’ll depend on whether or not will be our planned retirement date). what capital sum might be expected to
you are following—in exactly this The great thing about this is the enable us to cover that income need,
order—the three fundamental steps realization that the most important at an initial withdrawal rate of four to
to a genuinely successful lifetime of variables in investment success are four and a half percent? Ideally, that
investing: goals—plan—portfolio. within your control—as opposed withdrawal would rise as our cost of
to economic and market variables, living rises, and we would also have
This may be somewhat startling
which are beyond your control. Let’s funds set aside for emergencies.
to investors who think successful
consider them in order:
investing is a function of whether or This, then, is the essence of goal
not their portfolio is outperforming setting: knowing what we’re investing
some benchmark, or of getting in
(continued on page 2)
We believe that true wealth lies within all that you cherish that money cannot buy and
The Waterford Difference death cannot take away. That is where the Waterford difference begins.
First Quarter Newsletter
Ask yourself:
What am I investing
for, and how will I
know whether I’m
succeeding or not?
for and having a fairly good idea of you retire. None of us were ever first cut at this, but in the end, I think
how much capital will be necessary trained to do this. you’re going to want to be looking
to fund that goal. That should be Which is why this is where—if he/ in someone’s eyes as the exercise
very good information for the folks she hasn’t already—your financial unfolds. There’s just too much riding
who’ll ultimately read this little advisor comes in. I suppose there on it.
essay: without a clear, specific are any number of software programs PORTFOLIO. The last piece of the
accumulation goal—and a sense of that might let you take a pretty good puzzle is the portfolio you and your
when you’ll need to have reached advisor choose to be the funding
it—nothing else matters much. As medium for your plan. The key phrase
the immortal Yogi Berra said, “If you in that sentence is, of course, “funding
don’t know where you’re going, you Thank you for your medium.”
might not get there.”
continued confidence A portfolio isn’t an end in itself, nor
PLAN. Then—but only then—the is beating a benchmark a financial
issue becomes making a written, and trust in our team. goal. (Not running out of money in
date-specific, dollar-specific A true compliment retirement is a financial goal—indeed,
plan for accumulating that capital some of us see it as the financial
sum in the time allotted. Again, the is to entrust us in goal.) The portfolio is simply a
issues are two-fold: (1) how much assisting your loved means to an end.
must you regularly be putting away,
and (2) at what assumed rate of ones to achieve their This tells you that you’re not going
to be choosing a long-term portfolio
return, to get you from where you are financial goals as well. based on some or another economic
now to where your (inflation-adjusted) or financial out-look. You’ll choose it
goals say you need to be by the time
(continued on page 4)
Waterford Advisors, LLC 2
April 2021
T A X
CORNER
S P O T L I G H T
The past year has been unique and
challenging in many ways. It has also
provided us the opportunity to reflect
on values and things we hold dear. In
many cases, this includes a greater Dan Byles-Smith
CPA,CFP ®
appreciation for the community around us Principal
which allows us to thrive. This quarter, we
have decided to replace our typical Tax
Corner article with a spotlight on a local
organization that has been an integral
part in building the local community over
the past 100 years, and through many
collaborative initiatives, has made an
impactful difference in helping those less
fortunate weather the storm of the past
12 months; the Community Foundation
“One of the first things
that I liked about
for Greater Buffalo. the Community
Foundation for Greater
Buffalo is the fact that
we could set up our Working closely with clients, the
Community Foundation can be a
own foundation within philanthropic partner to make the process
the Foundation and of giving easier, more efficient, and
support the charities impactful. Clients can personalize their
plans and: Establish a fund or foundation
that we were most during their lifetime or as part of their estate
Making the Most of Your Generosity
interested in. The plan; give in Western New York and across
As Western New Yorkers, we want to be the globe; support specific organizations,
able to do good in our community and Community Foundation
issues and communities they care
make a positive impact today, tomorrow, introduces clients to about; give individually and/or as part of
and forever. That is true now more than new ideas, new issues, a collective effort; engage their children
ever, as we not only work to address or grandchildren as future successors to
the current challenges we all face in the
wake of the pandemic, but also continue
and new possibilities.
“ their fund or foundation; and/or give over a
period of time or create a perpetual source
to support the future of the organizations, –Current Client
of funding.
causes, and communities we care about.
Most people want to leave a legacy; some
Doing good means something different to proof that their life made a difference.
The Community Foundation hears time
each one of us, and these distinct values Legacy Funds are ideal for families
and time again from clients that they
that every individual, couple, and family and individuals who want to support
are focused forward on the future of
possesses influence charitable goals. We organizations, issues, and communities
their families, their legacy and that of
recognize that your giving is as unique that meant the most to them during
the organizations and communities they
as your fingerprint. For more than 100 their lifetime.
care about. Whether you are a teacher
years, the Community Foundation for
who wants to support education forever, The Community Foundation works
Greater Buffalo has worked with clients to
part of a family foundation who wants with clients to ensure their wishes are
provide customized and flexible solutions
to pass along a legacy of giving to your documented and carried out as intended,
to connect people, ideas, and resources
children and grandchildren, or a proud in their names, forever. Legacy funds
to improve lives in Western New York so
Western New Yorker who wants to know provide you with the flexibility and simplicity
people can give back in the way that is
your hard earned dollars are still making to include your fund as a beneficiary
most meaningful to them.
a difference a hundred years from now, of your Will, trust, or retirement assets.
there is no limit to how you can make
an impact.
(continued on page 4)
3 waterfordadv.com • 716-580-3906
First Quarter Newsletter
T A X
CORNER
(continued from pg. 3)
How It Works The Impact of Endowments
Choose one or a combination of options
This endowment was established
that can support specific organizations,
issues or areas of need, or the changing
with $2.1 million in 1978 through
$9.0
All balances in millions
$
9.2 M
a legacy gift (bequest) to the
needs of our community over time.
Community Foundation from a parent
$7.5 $
8.0M
How will you leave your mark on Western in honor of his son who died tragically $6.0
New York? While that part is up to you, as a young man. Today, decades
the Community Foundation will work after both father and son have passed $4.5
with you to make your charitable goals a on, the initial gift has more than tripled
reality. to $8 million, all while giving $9.2 $3.0
To learn more about the Community million in grants to the organizations
Foundation, please contact Betsy they cared about. Their fund will
Constantine at (716) 852-2857. continue to honor this family’s
$1.5 $
2.1M
charitable giving legacy by making $0.0
grants to their favorite organizations ORIGINAL VALUE TOTAL
in their name, forever. GIFT IN 2020 GRANTS TO
IN 1978 CHARITY
SINCE 1978
Three steps to successful
I N V E S T I N G
(continued from pg. 2)
based on what mix of assets has Once again, then, the sequence still accumulating for retirement. But if
historically delivered the return of the three steps to long-term there is, I don’t know it. When you’re
you need over long time horizons. investment success must always be: beavering ahead, pursuing a multi-
Will that same mix deliver its precise goals—plan—portfolio. Take these year investment plan, you want the
historical trendline return over your steps out of their proper order—much market to go down the way the Boston
particular run-up to retirement? It less skip one altogether—and at Irish used to vote: early and often. The
doesn’t seem likely: the randomness some point, you’ll get to watch all more shares you can get into the barn
of equity returns being what it is, the lights going out. at fear-driven low prices, the more
you may have to hunker down and There is, however, one other point to likely you are to reach your long-term
practice greater-than-projected thrift be made here. It concerns the great goals.
to have a hope of achieving your reward we historically reap when we If you haven’t got these three steps
goals. On the other hand, returns pursue a long-term plan of investing in place, and in this order, you know
may outrun your target, such that you systematically toward a goal. what your next conversation with your
end up not having to invest as much Specifically, we get to experience financial advisor needs to be about.
money as you’d planned (unless, perfectly normal equity market Hint: it isn’t what the market is going
of course, you want to). This is yet setbacks as opportunists rather than to do next.
another variable over which you as victims. © April 2021 Nick Murray. All rights reserved.
have no control. What matters is that Used by permission.
you always know where you are There may be a more irrational
relative to where you expected to investment policy than wanting
be and can adjust accordingly. the market to go up while you’re
Waterford Advisors, LLC 4
April 2021
Waterford
H A P P E N I N G S
Here’s the latest from your friends at Waterford Advisors…
Marybeth Rose
Planning Associate
Celebrating a New
Waterford Generation
Please enjoy an update on some
of our newest additions to the
“Waterford family.”
Alexandra Rachel
“Allie” Kozerski
Born 4/26/2018 to parents
Greg and Erin Kozerski Thomas W.
Byles-Smith (left)
Born 4/21/2016 to parents
Dan and Jill Byles-Smith
Jonathan M.
Byles-Smith (right)
Born 10/17/2018 to parents
Dan and Jill Byles-Smith
Maeve Rae Harmer Elise Marigold Brennan As always,
Born 10/19/2020 to parents Mike Born 2/26/2018 to parents Ellen
and Marissa Harmer Bosco-Brennan and Mike Brennan we welcome your
comments or
questions and
invite you to share
our newsletter
with family
and friends.
Joseph David
Relationships Beyond Investing
“Joey” Michalczak Isabel C. “Izzy” Polkovitz
Born 1/30/2019 to parents Born 11/03/2020 to parents Abigail
Christina and Dave Michalczak Shaw and Mark Polkovitz
5 waterfordadv.com • 716-580-3906
First Quarter Newsletter
W H AT I S A
Target Date Fund Glide Path?
A Target Date Fund (TDF) is the “set It’s important to note that the managers of
it and forget it” fund option for many TDFs don’t just change the percentage of
401(k) plan participants and retirement equity funds and fixed income funds over
investors. This type of fund automatically time but also tactfully manage the types
rebalances the overall asset allocation for Christina M. Michalczak of equities and fixed income funds over
CFP ®, QPFC
a targeted mix of equity and fixed income Principal time as well to take advantage of current
investments based on the investor’s market opportunities and benefit the
age and an assumed retirement date. retirement investor. TDFs are an easy and
Often TDFs are named as the default efficient way of ensuring that participants
investment option within 401(k) plans have a proper asset allocation based on
since they are designed to be age their age and time until retirement that they
appropriate and generally do not require don’t have to manage themselves.
the participant to make any allocation TDFs can help participants avoid being
changes themselves over time. The A TDF’s glide path their own worst enemy by being too
year noted in the TDF name is the year reactive to volatile markets. It’s important
the plan participant plans to retire; their is the changing mix to remember that even with their growing
targeted retirement date (ex. Target popularity, TDFs aren’t perfect and are
Date 2030 is referring to the year 2030, of equity and fixed
not always the optimal choice for every
a participant looking to retire during that income investments participant or retirement investor. All
year would select this fund as his or investments carry some risks and TDFs
her investment option). Most TDFs are over time. are no exception. However, for many
named in five-year increments, so the participants, the one stop convenience
participant would choose the fund closest often makes them the right choice.
to his or her planned retirement date. of the portfolio value throughout the
Most TDFs assume a retirement date of participant’s retirement time frame. A If you have questions about a TDF that
age 65, however a participant can select 65-year-old is still a long-term investor you’re invested in or you would like to
any TDF that is appropriate based on his with a 30-year time horizon which needs learn more about them, please don’t
or her goals and desired retirement date. to be planned for by the portfolio asset hesitate to contact our office.
allocation. Below is a basic example of a Source: https://www.plansponsor.com/in-depth/
A TDF’s glide path is the changing mix understanding-tdf-glide-paths/
of equity and fixed income investments TDF glide path.
over time. As the participant’s target
retirement date gets closer, the fund’s TDF Glide Path
overall asset allocation “glides down” to Build Wealth Preserve Wealth
a less volatile mix of investments. For 100
younger participants with a significant • Inflation Protection
amount of time before reaching their 90
• Balanced Funds • Capital Preservation
targeted retirement date, the overall asset 80 Fixed Income
• Income
allocation will be much more aggressive Bonds shift refunds
with higher credit
and hold a greater percentage of equity 70
• Diversification quality and
funds than fixed income funds, with a 60 • Growth-and-Income Funds from Equity lower duration
primary goal of growth. Over time, those
investments will shift to more fixed income 50
• Equity Income
investments so that the overall asset 40
allocation becomes more conservative
and more aligned with preserving capital 30
Equity
and generating income. Exposure gradually
20 • Growth Funds shifts to higher-yielding
Some TDF glide paths continue holding fund with a history of
lower volatility
10
some equity funds past the targeted
retirement date in order to provide growth 0
opportunities to ensure the longevity 45 40 35 30 25 20 15 10 5 Retirement +5
After
+10
After
+15
After
+20
After
+25
After
+30
After
Accumulation Transition Distribution
Source: Capital Group/American Funds
Waterford Advisors, LLC 6
April 2021
Market
RECAP
Global stocks continued to power upward of the pandemic. There is a lot of
this quarter from their pandemic bear potential pent-up spending. Add in an
market low on March 23, 2020. U.S. expected economic rebound from the
stocks, developed international stocks, pandemic, and the Fed doing everything
and emerging-market stocks are now up Mike Harmer it can to stoke a healthy level of inflation,
CFP ®, EA
an astonishing 80.6%, 74.8%, and 74.6%, Principal and investors and consumers are
respectively, since then. Clearly, it paid understandably worried about maintaining
not to panic and get out of the markets their purchasing power. An inflation spiral
last spring. would be bad for stocks, bonds, and
Due to expectations for a reinvigorated pocketbooks.
economy this year, the market has fiscal stimulus enacted early in the new In the coming months, we will in fact
seen a “reflation rotation”: For a couple administration, will supercharge economic see year-over-year inflation increase,
of quarters now, equity investors have growth further. That should in turn feed most likely to the 3%-plus range. But
been betting on more economically into company earnings. Yet the Federal this is largely due to prices rebounding
sensitive small caps and value stocks Reserve continues to reiterate that it will from the pandemic lows. We want our
and eschewing large caps and previously not preemptively raise interest rates. It clients to know that what really matters is
highflying growth stocks. intends to wait till it sees inflation above its meaningful, sustained inflation. The jury
The reflationary winds tore through 2% target for an extended period of time, will still be out even after the next couple of
the bond market as well. The prospect a new policy that suggests this economic months as to whether this higher inflation
of higher growth and higher inflation cycle has plenty of room to run. will be transitory or the beginning of a
caused interest rates to jump. The longer-term trend.
So high economic
10-year Treasury yield more than tripled growth, strong
from the historic low it set last August. earnings growth,
Correspondingly, the core bond index but low interest
fell 3.6%, suffering its worst quarter since rates? Equity
1981. On the flipside, floating-rate loans, investors couldn’t
which benefit from reflation, gained ask for more. The
1.8%. And most of the flexible, active main threat is our
bond strategies we invest with delivered old friend valuation
positive returns this quarter, despite risk. However, stocks
higher rates (and all outperformed remain reasonably
core bonds). attractive relative
Investment Outlook to bonds.
The primary variables that will determine Speaking of bonds, longer-term Our portfolios tilt toward stocks that will
the direction of the economy and markets interest rates have risen in anticipation benefit from higher economic growth.
remain COVID-19 developments and the of a higher-growth, more inflationary Floating-rate loans offer natural inflation
fiscal/monetary policy response. These environment. That has hurt bond protection. And we have diversified into
currently imply a base case for a strong investors this year. We have felt less flexible bond strategies that, with their
economic rebound, particularly in the of an impact as we were significantly yield advantage and active management
United States but also globally. This will underweight to core bonds to protect flexibility, should outperform core bonds.
support the fundamentals underpinning against just this occurrence. Rates could Our financial planners are always
higher-returning asset classes (stocks, rise further in the short run leading to available to answer any specific
credit sectors of the bond market) if greater bond price declines, but they questions that you may have.
interest rates do not move sharply higher. should stay contained unless inflation Please feel free to contact our
spikes up and stays higher. office at any time.
At the current vaccination rate, experts
estimate the United States could What About Inflation? Source: Certain material in this work is proprietary
to and copyrighted by Litman Gregory Analytics and
achieve herd immunity by late summer. Inflation has been at the top of investors’ is used by Waterford Advisors, LLC with permission.
Reproduction or distribution of this material is
Controlling the pandemic will enable list of concerns lately. Governments prohibited, and all rights are reserved
us to start getting back to normal lives, all over the world have passed large
boosting economic activity. The American fiscal stimulus packages in the wake
Rescue Plan (ARP) Act, the massive
7 waterfordadv.com • 716-580-3906
First Quarter
Newsletter April 2021
C O N G R AT S
Ellen!
Please join us is congratulating Ellen Bosco-Brennan
in attaining the Financial Paraplanner Qualified
Professional™ Designation! The FPQP™ program
covers the main facets in personal financial planning
with a focus on practical application, such as estate,
tax, retirement, insurance, and investments.
Certified Financial Planner™
Visit us online at waterfordadv.com
Phone: 716-580-3906
3858 North Buffalo Road, Suite 2
Orchard Park, New York 14127
Inside this issue…
Tax Corner Happenings
Page 3 Page 5
Target Date Market Recap
Fund Glide Page 7
Paths
Page 6
Securities offered through Cadaret, Grant & Co., Inc., member FINRA/SIPC.
Advisory services offered through Waterford Advisors LLC, an SEC Registered
Investment Advisor. Waterford Advisors and Cadaret, Grant & Co., Inc. are separate
entities.
All information is believed to be from reliable sources; however, we make no
representation as to its completeness or accuracy.
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