What 20+ years of data says about reacting to market headlines.

Hi Reader,

If your inbox and news feed look anything like ours, the last few weeks have served up plenty of reasons to second-guess your portfolio — tariffs, elections, a new Fed chairman, a war, an AI boom, oil price spike, private credit failures, and more. We are asked regularly whether it represents a good time to change up the portfolio and sell, or buy, because of concerns or optimism about the market.

Our answer is almost always the same. Stay the course, and avoid making big changes based on the headlines.

It is important to know that this is not out of complacency, laziness, or a lack of paying attention to what is going on. It is because we've looked hard at the evidence on what happens when investors act on that instinct to trade.

First, know that even professionals have a terrible track record. S&P Dow Jones Indices has published the "SPIVA Scorecard" for over 20 years, tracking how actively managed mutual funds perform against their benchmarks.

The table below shows the percentage of actively managed funds that underperformed their benchmarks over certain time periods. For example, the first row in the table is showing that 79.83% of domestic stock funds underperformed last year, and 95.01% have underperformed over the last 20 years:

Buying and holding a low-cost index fund for the last 20 years would very likely have put you in the top 10% of investors!

The gap in performance exists in every fund category, and extends to fixed income as well.

The past 20 years has seen 90%+ of active investors underperform their benchmarks. These are people who read every earnings report, every Fed statement, and trade on news the moment it breaks. If anyone could turn headlines into outperformance, it should be them. And yet, a basic low cost index fund outperforms the vast majority of them over the long-term.

If you think the problem is simply with the fees that active managers charge, you should know that individual investors fare worse.

Morningstar's annual "Mind the Gap" study measures the difference between what certain funds returned compared to what investors in those funds actually earned.

Over the 10 years ending December 2024, the average investor earned about 1.2% per year less than the funds they owned, because they tried to move in and out to time the market. Cutting out the fees of active managers and owning index funds is no guarantee you'll match the market's return, you also need to stay invested.

Those poorly timed buy and sell decisions cost the average investor roughly 15% of the return their funds produced.

Morningstar's headline says it best: the more investors traded, the less they made.

So when we tell you the right move is usually no move at all, it isn't complacency. It's that the evidence is clear: investors who try to time entries and exits based on the news consistently damage their own portfolios.

Our focus will continue to be on the elements of your plan that are within our control and where we can add value. Tax loss harvesting, Roth conversions, IRMAA management, withdrawal strategies, rebalancing, insurance, and estate planning can all be beneficial to your plan regardless of what the market is doing today.

As always, if the topics in this newsletter prompt any questions or concerns, simply hit reply to this email and we will be in touch!

Regards,

The Arnold & Mote Team

May Webinar: Trump Accounts Are Almost Here - Should You Open One?

Beginning July 4th, you will be able to begin saving into a Trump Account for your children, grandchildren, nieces, nephews, or anyone else under the age of 18 you'd like to save for.

For children born between January 1, 2025 and December 31, 2028, the federal government will seed each account with $1,000. After that, parents, grandparents, employers, and others can contribute up to a combined $5,000 per year per child.

Because Trump Accounts are brand new, they are getting a lot of attention. But saving for the next generation is nothing new. 529 plans, UTMAs, UGMAs, brokerage accounts, and custodial Roth IRAs already exist and remain great options for most families. This month, we'll break down how Trump Accounts actually work, and whether they belong in your plan alongside (or instead of) what you're already using.

In this webinar, we’ll cover:

• The basic features of Trump Accounts: tax treatment, contribution rules, eligible investments, and withdrawal restrictions
• How Trump Accounts compare to 529s, UTMAs, UGMAs, custodial Roth IRAs, and brokerage accounts
• When it actually makes sense to fund one

Join us for the live broadcast at noon Central Time on Friday, May 22nd, streamed on our YouTube channel here:

Want a reminder before we go live? Click the button above and subscribe to our channel to be notified as the webinar begins:

If you can't attend live, a replay of the webinar will be accessible immediately after and available alongside recordings of all previous webinars on our YouTube channel.

Have a question you'd like us to address during the webinar? Just reply and let us know.

Miss last month's webinar? You can view a replay of How to Review Your 2025 Tax Return here.

From the Arnold & Mote Blog

​HSA and Medicare Premiums – How to Best Use Your HSA After Age 65​

Once you enroll in Medicare, you can no longer contribute to your HSA, but you can still spend it tax-free for the rest of your life. For many retirees, a Health Savings Account is one of the most powerful retirement accounts they own.

The fine print matters, though! Not all Medicare expenses are eligible for tax-free HSA withdrawals. Some Medicare premiums qualify, others don't, and the timing of withdrawals can have real tax consequences.

Our latest blog post covers how to make the most of an HSA after 65:

Arnold & Mote Featured in the Press

MSN Money: The Roth Conversion Window Many Retirees Miss​

Many retirees assume their tax bills will drop in retirement. But for those with sizable traditional IRA and 401(k) balances, the biggest tax bills often arrive late in retirement when Social Security and RMDs both kick in. We were recently quoted in an article on MSN about a narrow window to get ahead of that: the gap years between retiring and starting Social Security, when Roth conversions can be done at unusually low rates.

See our other recent press mentions on our Press Page.

Looking for Something From a Prior Newsletter?

As a reminder, you can now find the last 12 months of our newsletters here:

Whether you’re new and want to browse newsletters you missed or are trying to follow up on a topic from a few months ago, we’re now publishing all newsletters at the link above. We'll also keep this link at the bottom of all future newsletters.

Quinn and the Arnold & Mote Wealth Management Team

(319) 393-4020

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The information herein was obtained from various sources. Arnold & Mote Wealth Management does not guarantee the accuracy or completeness of such information provided by third parties. The information given is as of the date indicated and believed to be reliable. Arnold & Mote Wealth Management assumes no obligation to update this information, or to advise on further developments relating to it. This is for informational purposes only. Investing may involve risk including loss of principal. Past performance is no guarantee of future results.