You’ll Love This Juice Subscriber’s Amazing Retirement Situation

We have been asking Juice readers to share feedback and details of their financial situations. We love hearing from subscribers. So we’re happy to see you engage with us. To send your thoughts to The Juice, use the link at the bottom of this email. 

Before we get to one of our subscriber’s amazing retirement situation, a quick note. 

As we were playing with Trackstar, our proprietary sentiment indicator, we noticed that the iShares Russell 2000 ETF (IWM) jumped into the top five ETFs investors are searching for most across our 100+ financial media partners. This tells us that these retail investors could be onto something. 

Some people on Wall Street think small caps might be set for a run. 

Over the last year, they haven’t done all that well. Consider IWM. 

It’s down nearly 3% over the last year, compared to approximately 14% and 37% gains in the SPDR S&P 500 ETF (SPY) and Invesco QQQ ETF (QQQ). However, if you look at the last six months, you’ll see IWN is flat. Over the last month, IWN, SPY and QQQ are basically neck and neck. With SPY and QQQ outpacing IWN by roughly half a percent. 

To this end, consider something Fidelity Investments observed in August: 

After lagging large caps in recent years, small caps are currently selling at wide and attractive discounts relative to large-company stocks.

Indeed, we’ve already begun to see signs that small caps may be ready to join the front of the pack. While the Russell 2000 Index was essentially flat for the first 5 months of the year, it suddenly sprang to life in June and July—and as of mid-August had returned more than 10% year-to-date.

And part of a note we received from fund company Wisdom Tree in late October: 

The valuation dispersion between large cap and small-cap stocks has become historically wide, and we believe mean reversion will set in at some point. We maintain our overweight allocations in small-cap stocks relative to our benchmarks …

If we are correct in our view that the value trade is rebounding and that small caps present a relative value opportunity, our Portfolios are positioned to take advantage of that.

So there are some believers out there that small cap stocks might be a good place for your money going forward. And Trackstar appears to at least partially confirm this sentiment. And not just among retail investors. If you take away leveraged equity ETFs (which advisors love to look at!), you’ll see that IWM is now the 4th most searched ETF among financial professionals. 

Of course, IWN tracks the Russell 2000 Index of small cap stocks. 

Just some food for thought via Trackstar and some of the so-called big money.  

Back to Main Street, where a subscriber, Jerry, emailed The Juice with what is truly a dreamy retirement situation. Here it is, edited for space, clarity and emphasis:

I have been very fortunate to have an excellent financial advisor. I started my investing with Morgan Stanley in 1989. Over the years since I rolled over my 401k to an IRA. In 2007 I retired at the age of 57. I started withdrawing $25,000 per year and have kept that same withdrawal amount for 16 years. My account balance has fluctuated over the years, however, my withdrawals have remained the same. My present balance is actually about $5.000 more than when I started withdrawing. Over the years my advisor has helped me keep my dividends close to covering my withdrawals while maintaining my principal. I am now 73 and have withdrawn $400,000 from my account and still have the same amount I started with! 

So, like, is this even possible anymore? 

That’s not a rhetorical question, so please feel free to add your two cents at the feedback link below. 

We ask because, with the housing crisis we spent much of October outlining and an increased cost of living that still feels high even as inflation cools, do people still have enough money left over to invest to do what Jerry did? 

We’re not as concerned about the 50 or 60-plus crowd who secured solid housing situations back in the day. We’re worried about the 20, 30 and even 40 year olds coming up who might not be homeowners. The folks who would have to stretch to buy a house if it’s even possible. People struggling so much to make ends meet that they’re in debt. It’s a problem, as we outlined last week when we looked at the increase in early withdrawals and loans from 401(k)s. 

The Bottom Line: We’re just concerned that for every 73-year old Jerry who appears to have secured a relatively comfortable retirement alongside a solid nest egg, there’s more than one 30-year old who thinks anything close to Jerry’s story is a pipe dream. 

On the bright side, if you have money left over most months, the stock market has proven that, over the long haul, it can help make you comfortable, if not wealthy or even rich. While it’s not nice to keep an eye on potentially emerging areas of the market, such as small caps, for most long-term investors, following a solid ETF approach, led by SPY and QQQ, can make the most sense.

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