Retirement on Hold

Michael Martin, a principal in the firm of Financial Advantage Inc. in Columbia, Md., has always taken a conservative approach to both retirement investing and retirement income planning and finds it is paying off in the current environment. “We’re getting an unusual number of happy e-mails from clients thanking us for keeping their portfolios productive and on an even keel. We’ve always thought that retirement portfolios should be managed actively for absolute returns because sustaining withdrawals is a huge part of the retirement challenge,” Martin explains.

His message is that static allocations and passive diversification across the style boxes is “not appropriate to the goals of retirees, and if the investment manager is attentive to big-picture market signals (such as the fact that a high P/E for the broad indexes portends low future returns, especially when business profit margins are at all-time highs) it is possible to achieve absolute returns, but this also requires a temperate view of return potential.” Financial Advantage has had no down years since January 1, 2000. In this year’s first quarter, Martin says “our portfolios earned 0.0% versus the S&P’s 10% decline.” In other words, his existing retired clients are being very well served.