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The Markets Monthly Review

As April came to a close, each of the benchmark indexes listed here posted strong monthly returns. In fact, for several of the indexes, April brought to a close the best four-month stretch in many years. Both the Nasdaq and S&P 500 reached new highs during the month, as investors were encouraged by a shrinking trade deficit, favorable economic projections, low inflation, and stable interest rates. The Nasdaq led the way, nearing a monthly gain of almost 5.0%, followed by the large caps of the S&P 500, the small caps of the Russell 2000, the Global Dow, and the Dow, which gained over 2.5% for the month. During April, consumers saw gas prices climb as oil prices continued to soar.

By the close of trading on April 30, the price of crude oil (WTI) was $63.42 per barrel, up from the March 29 price of $60.19 per barrel. The national average retail regular gasoline price was $2.887 per gallon on April 29, up from the March 25 selling price of $2.623, and $0.041 more than a year ago. The price of gold dipped by the end of April, falling to $1,285.10 by close of business on the 30th, down from $1,325.70 at the end of March.

did you know?

Global market volatility has investors panicking, and making bad decisions based on fear or greed. More than ever, advisors need to be behavioral coaches and well as providing the more traditional role of serving in their clients’ best interest when offering financial advice. A recent study by the Centers for Disease Control and Prevention find that retirees may need additional coaching, emotional support and counseling on how to handle their so-called Golden Years.

  • Retired men are 40% more likely to experience depression than employed men
  • Retirees report more boredom, anxiety, restlessness and feelings of uselessness
  • “Being emotionally grounded going into retirement will likely lead to better, more mindful financial decisions in retirement”

Sources: MarketWatch, CDCP

bright ideas
Emotional Rescue
How to Transform the Client Experience with Behavioral Coaching

During the 1980s, the Fidelity Magellan Fund returned 21.8% a year to investors. The market was up 16.2% a year, so it was a great time, in general, to be in the market. But the average investor in Fidelity Magellan during the 80s only made 13.4%. So, how is that? How is it that investors did worse than the actual fund?

In short, emotions often drive investor decisions. In one of the more dramatic examples, look to Black Monday, October 19, 1987, when markets crashed on a global scale. Domestically, the Dow fell 508 points (22.61%) in a single day and investors followed suit, selling at the bottom.

That negative trend of selling at market lows and buying at market highs remains a fixture for emotional investors. More recently, in 2007, as the housing bubbled swelled, we experienced a euphoria from investors. As the S&P 500 reached its peak, so did net new equity fund cash flows as investors bought at the top. Once the bubble burst, so did investor confidence. They sold at the bottom, and in doing so, lost their gains.

07 Chart

In both cases—buying at the top and selling at the bottom—investors made the wrong decision at the wrong time. Why would someone make that choice?


Aversion Diversion

According to behavioral theorists Daniel Kahneman and Amos Tversky, humans, by nature, are loss-averse—they dislike losses more than they enjoy successes. In their studies, Kahneman and Tversky found that people react twice as strongly to losses as to gains. For example, if you give someone a dollar, they register a ten in pleasure; however, if you take a dollar away from someone, they will register a 20 in pain. They further reveal that people are so averse to feeling that pain “they are willing to take risks to avoid the losses.”

Behavioral Coaching

With emotional impulses causing bad decisions for investors, it creates an opportunity for advisors to offer behavioral coaching to their clients. At Beacon, we’ve identified three key components of behavioral coaching.

1. Client education. As we discussed in a recent Bright Ideas column, education is at the forefront of the advisor-client relationship. With an education-first approach, the advisor makes sure the client understands why financial decisions are made, which helps build trust in the advisor and confidence for the investor.

2. Investment alignment. When you work with clients, it’s vital you make sure their investments are aligned with their goals, and the best way to achieve this is by helping them identify and truly understand what their investment goals are. This goes beyond a total number they want to achieve for retirement. It explains how they can get there through mechanical investment models that are based on a balanced portfolio and not reliant on chasing returns.

3. Emotional rescue. One of the most important aspects of behavioral coaching is dealing with the client’s emotional state during the natural market ups and downs. When a client gets panicky during market turmoil or extreme volatility, advisors serve an important role in helping calm them by explaining how their portfolio works and why it’s designed to help capture market upsides, but also to guard against catastrophic losses.

If you would like more information on Beacon’s strategies to help you serve as your client’s behavioral coach, contact your wholesaler today!

* Note – Gray overlay represents BCM’s August 17, 2007 to January 2, 2009 Stop Loss cycle, and BCM’s January 22, 2009 to March 25, 2009 Stop Loss cycle.

Source: Investment Company Institute and Dimensional Fund Advisors, December 12/31/2014

Data: Total return of equities is measured by the rolling 1-year total return of the S&P 500. Net new equity cash flows are measured by the rolling 6-month net cash flows.

beacon news

“Everyone is trying to figure out what will ultimately happen. Will tariffs kick in this evening?” said Chris Cook, president and CEO at Beacon Capital Management. “Markets are begging for good news, any glimmer that things are not blowing up.” Chis Cook, USA Today.

Be sure to visit Beacon’s News & Press page for the latest credibility pieces to share with your clients and prospects, and follow Beacon on LinkedIn for the latest updates as they happen.


For Advisor Use Only, Not to Be Used With Clients

The GIPS Compliant Presentations for our Vantage portfolios can be obtained by clicking on the below link.  If you would like the Compliant Presentations to be emailed directly via PDF file or if you would like to receive a copy of Beacon’s Composite Descriptions; please respond to this email or contact Beacon at 937-439-9093.

BCM 2017 Compliant Presentations

Beacon Capital Management, Inc. is a registered investment adviser with the Securities and Exchange Commission. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.

Additional information about Beacon Capital Management is also available on the SEC’s website at under CRD number 120641. Beacon Capital Management only transacts business in states where it is properly registered, notice filed, or excluded or exempted from registration or notice filing requirements.

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Beacon Capital Management

7777 Washington Village Drive, Suite 280, Dayton, OH 45459

P: 866.439.9093 | F: 937.424.4825