Tim Steffen, Milwaukee-based wealth management firm Baird’s director of financial planning, came to Charlotte, N.C., recently to speak to his company’s advisers and clients. He sat down with the Charlotte Observer beforehand to discuss the stock market’s recent success. Questions and answers have been edited for space and clarity.
QUESTION: The stock market continues to hit record highs. If you’re planning for retirement, that’s got to be a good thing, right?
ANSWER: It is, if you’re able to participate in that. I met with a client today who said that he’s been watching the market go up, but he’s not invested in it, so he’s not been able to participate in it.
You hear these studies all the time about how the market does and what returns the actual investor gets. There’s usually a big disconnect. They’re not getting in at the right time, they’re getting in and out of it, they’re missing out on some of the runs, so the actual investment performance is not as good. So, yeah, it’s been a great year in the market for most people who’ve been willing to ride it out, but there’s a lot of uncertainty out there.
Q: Where does that disconnect come from?
A: I think it’s a little uncertainty about what happened a few years ago with the recession. There’s still some distrust with the industry. Some of it is, quite honestly, warranted. There were some bad actors who caused some clients a lot of heartache. For the most part, the industry is working to clean itself up, but there are still people who are uneasy about where the market’s at.
It’s always dangerous to go and invest at a high. You’re wondering, “Is this the high?” We don’t know where the high’s going to be.
We look at a number of things to get a sense of where the market is heading. One of those is investor confidence. A lack of confidence is a sign that the market has some upside to it. When you get a lot of people who are eager to jump in and ready to go and say, “I’m all in on the market,” that’s when you start to get a little nervous that’s the sign of a bubble.
Q: Where are we on that spectrum?
A: It’s still building but not to a level where we’re concerned. ... The trend is slowly moving more positive.
Q: There continues to be uncertainty in Washington, D.C., from the recent government shutdown to the debt ceiling debate. If you’re planning for retirement, should you be concerned? Should you be doing anything?
A: You can’t be afraid of the market. That’s how you’re going to be able to build your retirement fund. But on the other hand, you have to be careful and not try to get too overly aggressive and too greedy. That’s how you can blow up a retirement plan pretty quickly.Andrew Dunn writes for The Charlotte Observer.