Even Robust On-Line Retirement Tools Are Fraught With "Irregularities"
How comfortable would you be if you knew that the online retirement calculator you used, failed to muster a passing grade?
Well, according to Texas Tech University researchers, that’s exactly what they found.
In a recent study, researchers tested 36 online retirement tools, including major players Vanguard Group, Fidelity Investments, T. Rowe Price Group, AARP, the Financial Industry Regulatory Group (FINRA) and others. The research team, which included well-known industry veteran Harold Evensky, found only 11 of the 36 worthy of a passing grade. The team cited overly simplistic tools as one of the main reasons for its harsh assessment.
For example, most of us are aware that health care costs have been rising faster than overall inflation, yet many calculators ignore the issue, which can have major consequences on retirement planning. The average person who has smoked throughout adulthood has a 6.5 to 15 year shorter life expectancy than a non-smoker. This point alone can have major implications on retirement planning.
In our opinion, even robust retirement tools are fraught with “irregularities”. All of these tools require assumptions about things like: returns, inflation, life expectancy, income and expenses, to name a few. As well intentioned and rigorously researched these assumptions are, they still remain, well, assumptions. Case in point, the average annual return for the S&P 500 over the last 87 years has been 9.5%. Over the last 50 years 9.61%. The average would imply an assumed 9.5% return for stocks is reasonable, yet, over the past 87 years care to guess how many times the S&P actually returned 9.5%? If you said zero, gold star for you!
But Hey, it’s Only Your Retirement Money
So, why does it matter, if returns still average out to 9.5%? We end up in the same place, right? Actually, no. And, it is because of the sequence of returns. The sequence has big implications when it comes to retirement planning and, unfortunately, cannot be pre-determined. Experiencing lower than “assumed” returns in the first few years of retirement can have major negative implications. Above average returns also change the calculus. So what do you do?
With a fail rate of almost 70%, results from online calculators should be taken with a healthy dose of caution. Calculators can provide directional consistency, however for a truly rigorous analysis turn to your financial advisor, who typically, has more comprehensive and detailed software at his/her disposal.
Advisors are also subject to “assumption irregularities”, the difference, however, is a good advisor adapts and adjusts as actual results tip the assumption scale in one direction or the other. This is where the “rubber hits the road” and where an advisor’s value can really shine.
Similar to driving direction websites like MapQuest, retirement calculators can show you how to get from one place to another, but can’t adjust for unpredictability. Without more data, like real time traffic updates, you could find yourself sitting in a traffic jam as you make your way across town. The same could be said for retirement calculators, without robust planning tools and consistent monitoring, your favorite retirement calculator could be taking you down the wrong road.
China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity
Written by: Jeremie Capron
China is on a mission to change its reputation from a manufacturer of cheap, mass-produced goods to a world leader in high quality manufacturing. If that surprises you, you’re not the only one.
For decades, China has been synonymous with the word cheap. But times are changing, and much of that change is reliant on the adoption of robotics, automation, and artificial intelligence, or RAAI (pronounced “ray”). For investors, this shift is driving a major opportunity to capture growth and returns rooted in China’s rapidly increasing demand for RAAI technologies.
You may have heard of ‘Made in China 2025,’ the strategy announced in 2015 by the central government aimed at remaking its industrial sector into a global leader in high-technology products and advanced manufacturing techniques. Unlike some public relations announcements, this one is much more than just a marketing tagline. Heavily subsidized by the Chinese government, the program is focused on generating major investments in automated manufacturing processes, also referred to as Industry 4.0 technologies, in an effort to drive a massive transformation across every sector of manufacturing. The program aims to overhaul the infrastructure of China’s manufacturing industry by not only driving down costs, but also—and perhaps most importantly—by improving the quality of everything it manufactures, from textiles to automobiles to electronic components.
Already, China has become what is arguably the most exciting robotics market in the world. The numbers speak for themselves. In 2016 alone, more than 87,000 robots were sold in the country, representing a year-over-year increase of 27%, according to the International Federation of Robotics. Last month’s World Robot Conference 2017 in Beijing brought together nearly 300 artificial intelligence (AI) specialists and representatives of over 150 robotics enterprises, making it one of the world’s largest robotics-focused conference in the world to date. That’s quite a transition for a country that wasn’t even on the map in the area of robotics only a decade ago.
As impressive as that may be, what’s even more exciting for anyone with an eye on the robotics industry is the fact that this growth represents only a tiny fraction of the potential for robotics penetration across China’s manufacturing facilities—and for investors in the companies that are delivering or are poised to deliver on the promise of RAAI-driven manufacturing advancements.
Despite its commitment to leverage the power of robotics, automation and AI to meet its aggressive ‘Made in China 2025’ goals, at the moment China has only 1 robot in place for every 250 manufacturing workers. Compare that to countries like Germany and Japan, where manufacturers utilize an average of one robot for every 30 human workers. Even if China were simply trying to catch up to other countries’ use of robotics, those numbers would signal immense near-term growth. But China is on a mission to do much more than achieve the status quo. The result? According to a recent report by the International Federation of Robotics (IFR), in 2019 as much as 40% of the worldwide market volume of industrial robots could be sold in China alone.
To understand how the country can support such grand growth, just take a look at where and why robotics is being applied today. While the automotive sector has historically been the largest buyer of robots, China’s strategy reaches far and wide to include a wide variety of future-oriented manufacturing processes and industries.
Electronics is a key example. In fact, the electrical and electronics industry surpassed the automotive industry as the top buyer of robotics in 2016, with sales up 75% to almost 30,000 units. Assemblers such as Foxconn rely on thousands of workers to assemble today’s new iPhones. Until recently, the assembly of these highly delicate components required a level of human dexterity that robots simply could not match, as well as human vision to help ensure accuracy and quality. But recent advancements in robotics are changing all that. Industrial robots already have the ability to handle many of the miniature components in today’s smart phones. Very soon, these robots are expected to have the skills to bolster the human workforce, significantly increasing manufacturing capacity. Newer, more dexterous industrial robots are expected to significantly reduce human error during the assembly process of even the most fragile components, including the recently announced OLED (organic light-emitting diode) screens that Samsung and Apple introduced on their latest mobile devices including the iPhone X. Advancements in computer vision are transforming how critical quality checks are performed on these and many other electronic devices. All of these innovations are coming together at just the right time for a country that is striving to create the world’s most advanced manufacturing climate.
Clearly, China’s trajectory in the area of RAAI is in hyper drive. For investors who are seeking a tool to leverage this opportunity in an intelligent and perhaps unexpected way, the ROBO Global Robotics & Automation Index may help. The ROBO Index already offers a vast exposure to China’s potential growth due to the depth and breadth of the robotics and automation supply chain. As China continues to improve its manufacturing processes to meet its 2025 initiative, every supplier across China’s far-reaching supply chains will benefit. Wherever they are located, suppliers of RAAI-related components—reduction gears, sensors, linear motion systems, controllers, and so much more—are bracing for spikes in demand as China pushes to turn its dream into a reality.
Today, around 13% of the revenues generated by the ROBO Global Index members are driven by China’s investments in robotics and automation. Tomorrow? It’s hard to say. But one thing is for certain: China’s commitment to improving the quality and cost-efficiency of its manufacturing facilities is showing no signs of slowing down—and its reliance on robotics, automation, and artificial intelligence is vital to its success.
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