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Investment Horizon, Diversification and Rebalancing

As we experience a rough October for global stock markets, we think that it is a good time to discuss equity returns and the benefit of having a long-term view. Over the course of the last 91 years, equities have returned about 10% annually. The 10% average gain comes with short-term volatility however. The chart below illustrates that the longer your holding period or investment horizon the more likely you are to experience gains. At Von Holt Financial Advisors, we preach a 5 year or greater investment horizon. As the chart below shows, having a 5-year horizon rather than a 1-year horizon reduces the chance of experiencing a decline from 26% to just 14% of the time. Stretching the time horizon to 15 years results in not a single period in which a loss occurred.

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What is IRMAA?

It is the Income Related Medicare Adjustment Amount. Put simply, the more income on your tax return, the more your Medicare Part B and Part D prescription drug premiums will cost.

It can be triggered by a large capital gain or an extra IRA withdrawal. With a little planning and the use of Qualified Charitable Distributions (QCD) you can possibly limit the impact. You can also appeal your situation if you have an unusual or non-recurring event.

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