Investing

Why A Well Diversified Portfolio is the Hallmark of the Savvy Investor

We all seem to know a day trader or two: someone constantly hunting for the next hot stock. That’s not what I’d consider smart investing. Here’s why it’s wise to diversify your portfolio:

Diversification Helps You Manage Risk

We all want a terrific ROI, but risk management matters just as much in investing, perhaps more. That is why diversification is so important. There are two great reasons to invest across a range of asset classes, even when some are clearly outperforming others.

REASON #1:

Potentially Capture Gains in Different Market Climates

If you allocate your invested assets across the breadth of asset classes, you will at least have some percentage of your portfolio assigned to the market’s best-performing sectors on any given trading day. If your portfolio is too heavily weighted in one asset class, or in one stock, its return is riding too heavily on its performance.

Your portfolio is like a garden. A good gardener will plant a variety of flowers to ensure something is always blooming. The gardener knows that some flowers eventually die off or may not grow well but if there is enough diversity the overall picture will still look good.

REASON #2:

Potentially Less Financial Pain if Stocks Tank

If you have a lot of money in growth stocks and aggressive growth funds (and some people do), what happens to your portfolio in a correction or a bear market? You’ve got a bunch of losers on your hands. Tax loss harvesting can ease the pain only so much.

Diversification gives your portfolio a kind of “buffer” against market volatility and drawdowns. Without it, your exposure to risk is magnified.

ADVICE:

Don’t put all your eggs in one basket!

Believe the cliché: don’t put all your eggs in one basket. Wall Street is hardly uneventful and the behavior of the market sometimes leaves even seasoned analysts scratching their heads. We can’t predict how the market will perform; we can diversify to address the challenges presented by its ups and downs.


Sources

  1. usatoday30.usatoday.com/money/perfi/retirement/story/2011-12-08/investment-diversification/51749298/1
  2. This material was prepared, in part, by MarketingPro, Inc.

Market and Economic Update for The First Quarter of 2017

The year started with a bang as both US and international stock markets roared ahead in the first quarter. Bonds were much more muted as investors grappled with the potential upward nudging of rates by the Fed.

1Q.2017.graphic

The Markets & The Economy: A Look Back

As we pass the eighth anniversary of the turning of the markets and economy it is useful to look back and think about just how far we’ve come over that time. Things were looking pretty grim back in the spring of 2009 and almost all of us had been scarred in one way or another by the significant downturn in the economy that some call the Great Recession. On the business front some pretty big names had simply disappeared, tipped over into liquidation by that tumultuous series of events and families across the country were struggling to hold onto their jobs and their homes.

The Economy Today

Fast forward to today and things look a lot different. We have reached “full employment” and rather than a surplus of folks looking for work we now have many positions being unfilled. Businesses are healthy, the economy is chugging along and the stock market is breaking new records as corporate earnings move upwards and as investors increasingly feel comfortable with paying more for a dollar of earnings that they did a year or so ago.

Politics & The Market

It is an interesting time for certain. The change in the political landscape has been significant and markets and businesses have responded, seeing the potential for growth in the economy seemingly enhanced by the promise of lower taxes and less regulation. We’ve seen this most directly in the action of the stock market whose advance since the election has been robust but anecdotally we hear of businesses beginning to put capital to work and laying the plans for future expansion.

Future Assumptions

It’s important to remember that capital markets (stock, bond and other) look ahead and incorporate assumptions about what the world might look like 6 months or a year hence into the price movements of today. That market rise last quarter isn’t about what is so much as what will (or could) be. Should that vision of the future not turn out quite the way it might be expected to, then adjustments will be made in outlooks and be incorporated into the market levels of tomorrow.

Market Valuations

Over the long term, of course, stock prices are based on economic growth, the level of interest rates (as they set the bar for investment alternatives to stocks) and current market valuations, i.e. what investors are willing to pay for a dollar of current or future earnings. That last factor is a key one, and one that we employ regularly when looking at the relative attractiveness of the various components of our portfolios. Absolute valuations for the market as a whole (for instance “the market is too high”) are quite hard to make meaningful judgments about in the near and intermediate term as markets that are getting a bit pricey may continue to do so for some time and vice versa! We can however use relative valuations to see which segments of the market are starting to overheat or look very attractively priced and we review these data points on a continual basis as we think about constructive changes in our portfolios.

Looking Forward

Looking forward, markets will continue to be influenced by a number of economic factors. Corporate earnings are key of course and the direction of the economy is perhaps the major contributing factor to successful growing companies and to jobs and opportunities in communities throughout the country. So far so good on that score, we’re seeing continued economic growth coupled with low unemployment and the Conference Board’s leading economic indicators continue to point in the right direction.

Interest Rates

Interest rate increases, which folks expect more of this year, can have a moderating influence on markets in a number of ways but a measured pace of increases is not terribly worrisome as they reinforce the notion of strength in the broader economy. A significant difference over time in rates will also wiggle itself into the valuation equation however, which brings us back to, you guessed it, valuations!

What’s Next?

As we talked about earlier, trying to judge the valuation of the market as a whole is very difficult save perhaps in those times when valuations are near extremes of their range (think May of 2000 on the upper end and March of 2009 on the other end). Valuations have been creeping up over the last 8 years and we’re higher now than average certainly but perhaps not in the nosebleed territory as yet. These higher metrics could certainly provide, coupled with some other sort of economic uncertainty, an excuse though for the next market correction but that is just as it should be as market corrections do happen fairly frequently and their effects are naturally mitigated to some degree by our overall portfolio diversification.

In the meantime it’s spring, the days are longer and, thankfully, our televisions and computers have an “off” switch we can use to moderate the barrage of political and financial news that can be so unsettling at times. It’s the economy that will be the prime driver of the markets and the political parties have a lot less to do with that than one might be led to believe.


Source:

  1. Prepared by LSA Portfolio Analytics

How Much Can You Contribute to Your Retirement Plan in 2017?

A new year brings new opportunities to try and max out your retirement savings. Here’s a rundown of the 2017 contribution limits:

IRAs

For 2017 they remain the same as 2016: $5,500 for IRA owners who will be 49 and younger this year, $6,500 for IRA owners who will be 50 or older this year. These limits apply to both Roth and traditional IRAs. What if you own multiple IRAs? The total combined contributions cannot exceed the maximum allowed

401(k)s, 403(b)s, & 457s

Each of these workplace retirement plans have 2017 contribution limits of $18,000, $24,000 if you will be 50 or older this year. Now, If you are a participant in a 457 plan and within three years of what your employer deems “normal” retirement age, you can contribute up to $36,000 annually to your plan during the last three years preceding that “normal” retirement date.

2017.Contribution.Limits

High Earners

High earners may find their ability to make a full Roth IRA contribution restricted. This applies to a single filer or head of household whose modified adjusted gross income (MAGI) falls within the $118,000-133,000 range, and to married couples with a MAGI of $186,000-196,000. If your MAGI exceeds the high ends of those phase-out ranges, you may not make a 2017 Roth IRA contribution. (For tax year 2016, the respective phase-out ranges are $117,000-132,000 for single and $184,000-194,000 for married)

SIMPLE IRAs & SEP-IRAs

In 2017, the contribution limit for a SIMPLE IRA is $12,500; those who will be 50 or older this year may contribute up to $15,500. Federal law requires business owners to match these annual contributions to at least some degree; self-employed individuals can make both employee and employer contributions to a SIMPLE IRA. Both Business owners and the self-employed can contribute to SEP-IRAs. The annual contribution limit on a SEP-IRA is very high – in 2017, it is either $54,000 or 25% of your income, whichever is lower.


Sources

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. fool.com/retirement/2017/01/17/roth-vs-traditional-ira-which-is-better.aspx
  3. money.usnews.com/money/retirement/iras/articles/2016-12-19/how-saving-in-an-ira-can-reduce-your-2016-tax-bill
  4. forbes.com/sites/ashleaebeling/2016/10/27/irs-announces-2017-retirement-plans-contributions-limits-for-401ks-and-more/ 
  5. fool.com/retirement/2016/12/19/457-plan-contribution-limits-in-2017.aspx 
  6. money.cnn.com/2017/01/13/retirement/ira-myths/

3 Things To-Do in December to Keep Your Financial Life On Track

Here are 3 great year end tasks you should seriously considering doing this month:

TIP #1

Review Your Accounts

The end of the year is a great time to take a look at all your investment accounts to determine if you need to rebalance in the new year. Over time your portfolio can deviate from your intended allocation due to market fluctuations. If you are working with and advisor they will most likely be doing this for you.

TIP #2

Tax-Loss Harvest

Determine if you should do any tax-loss harvesting. What’s that? Tax-loss harvesting is the practice of selling a security that has experienced a loss. By realizing, or “harvesting” a loss, investors are able to offset taxes on both gains and income. In your taxable accounts, if you sold any capital assets for a gain this year, now may be a good time to sell off some of your investment dogs so that you can offset those gains with losses. If you are working with an advisor they can help with this. TIP: Your accountant can help you determine if you should take any capital gains or losses

TIP #3

Reflect on the Year

Take this month to reflect on your financial life this year. What went right and what went wrong? Make note of the good things and try to keep that going. For the things that didn’t work out see if there is any room for improvement next year.


Sources:

  1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
  2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
  3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

5 Smart End-of-the-Year Money Moves You Could Make Right Now

As the year comes to a close, here are 5 things you can do to help keep your financial life on track:

Ask yourself these 5 questions and then take action!

Question #1

What has changed for you in 2016?

Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and the new year begins. Even if this year has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little more wealth.

Question #2

Do You Practice Tax-Loss Harvesting?

Tax-loss harvesting is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. If you fall into one of the upper tax brackets, you might want to consider this move, which directly lowers your taxable income. Keep in mind this strategy should be made with the guidance of a financial professional you trust.(1)

Question #3

Do You Itemize Deductions?

If you do itemize deductions, great! Now would be a good time to get the receipts and assorted paperwork together. Besides a possible mortgage interest deduction, you might be able to take a state sales tax deduction, a student loan interest deduction, a military-related deduction, a deduction for the amount of estate tax paid on inherited IRA assets, an energy-saving deduction. There are so many deductions you can potentially claim, now is the time to meet with your tax professional to strategize to claim as many as you can.

Question #4

Are You Thinking of Gifting?

How about donating to a charity or some other kind of 501(c)(3) non-profit organization before 2016 ends? In most cases, these gifts are partly tax-deductible. Keep in mind, you must itemize deductions using Schedule A to claim a deduction for a charitable gift.(2)

Question #5

What Can You Do Before You Ring in The New Year?

Talk with a financial or tax professional now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.


Sources:

  1. fool.com/retirement/2016/11/09/1-smart-tax-move-to-make-before-the-end-of-2016.aspx
  2. irs.gov/taxtopics/tc506.html
  3. This material was prepared, in part, by MarketingPro, Inc.

What We Learned at Schwab IMPACT 2016 That Impacts YOUR Financial Life

Every year we trek to the Schwab IMPACT conference to learn the latest developments in financial planning and investment management so we can better serve you.

Day 1&2: The Election PLUS Tips For Your Kids 18+

screen-shot-2016-10-29-at-3-22-07-pm

The Market & The 2016 Presidential Election

Greg Valliere, Schwab’s Chief Political Strategist had this to say:

  • If Trump wins the markets may not respond favorably
  • On the flipside, if Hillary wins there may not be much in the way of volatility
  • Valliere anticipates Hillary winning by a 5-7 point lead spread
  • However, if Hillary wins by a wider margin we could see strong volatility along with potential changes to the house (not good historically for the markets)

Tips for Your Kids Heading To College

  • Consider having them sign Power of Attorney form (POA) before going off to school since you may not have access to their accounts.
  • Fill out the HIPAA release form at the college your child is attending. If something were to happen to your child the college could then release the information to you.

Day 3: Malcolm Gladwell PLUS Balancing Retirement & College Saving

screen-shot-2016-10-29-at-3-23-41-pm

Insights from Malcolm Gladwell

This year was packed with thought provoking commentaries from the likes of Malcolm Gladwell and political insight from Greg Valliere, Ian Bremmer, Alan Simpson and Robert Reich, plus MUCH more.
For those of you that don’t know, Malcolm Gladwell is the author of the Tipping Point, Blink, and Outliers.
He coined the phrase “Tipping Point” which is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire.

The Internet of Things

In his session he predicted that the internet of things is going to be as big as the industrial revolution. That’s a bold statement, but one to take notice of. We are beginning to see products like Amazon Dash, which is a Wi-Fi connected device that reorders your favorite product with the press of a button.The growth of internet connected “things” is expect to accelerated.

Playing Basketball vs. Playing Soccer

Gladwell also discussed how our country and economy has traditionally focused on making the best people even better. He illustrated that we operate like a basketball team. For a basketball team to be great, you really only need a few amazing players. It doesn’t matter how weak the rest of the team is so long as you have a few great players. And, if you work on making your best players even better, the team as a whole usually improves.
Soccer on the other hand requires that ALL players work together. Studies have shown that soccer scores can increase dramatically when time and energy is invested in coaching the weakest players on the team not the strongest players like in basketball.

Malcolm’s Advice: Improve The Weak Links

In the new world order, Gladwell suggests we invest in what he calls the weak links. He went on to explain that the best way to improve our economy is to invest in the weakest links.

College Planning vs. Retirement Planning

The balance between saving for college AND saving for retirement is difficult for most families. A study by JP Morgan reveals some useful guidance:

  • Only 0.3% of college student receive enough grants and scholarships to cover ALL costs
  • You need to to start saving now and seriously consider a 529 savings plan
  • The most important thing is to be saving for retirement
  • Saving for retirement should come BEFORE saving for college
  • The JP Morgan study says that saving 15% of what you make is the optimal number

Saving 15% is a great rule of thumb, however your situation could be different. What you need will depend on things like how much you have already saved, if are you planning on moving during retirement, if you will you work, or if you will receive an inheritance. So, there are lots of factors to consider which is where we can assist. At Weiss Financial Group we help figure out how much you NEED to save, how much you CAN save, and WHERE to invest the money.

For the Latest LIVE Videos Don’t Forget to Like Our Facebook Page 

I am live Wednesdays at noon answering your questions and providing smart tips.

Check it out here: http://bit.ly/WFGFacebook

Worrying About Your Portfolio? Why You Need to Know Your Risk Tolerance [VIDEO]

Knowing your Risk Tolerance or Risk Profile is important for smart investors. Below you’ll learn what it signifies AND why you need to know it.

Which Model Portfolio is Right For You?

If you work with an advisor they often use a few model portfolios which they’ll adapt for the unique needs of each client. Your risk profile indicates which of these model portfolios might become a good basis for your own, custom portfolio.

TYPES OF INVESTORS

  • Conservative

  • Moderate

  • Aggressive

Investors are usually categorized as “conservative”, “moderate” or “aggressive”, with in-between categories of “moderately aggressive” and “moderately conservative” which are based on your questionnaire responses.

The Conservative Investor

If you absolutely do not want to risk losing money, or if your first priority is consistent income to live on, you are a conservative investor. If these are your concerns and you are retired or about to retire, you should probably avoid high-risk investments.

If you retire with an aggressive portfolio and your investments tank, it could take (many) years to rebuild your savings, years you might not have.

The Moderately Conservative Investor

However, many pre-retirees and new retirees are moderately conservative: they are cautious with money in their lives and don’t want to take on a risky portfolio, but they still have a need to accumulate assets because they have either started saving for the future too late or lost assets as a result of market downturns or poor or unfortunate financial decisions.

The Aggressive Investor &

Moderately Aggressive Investor

Aggressive and moderately aggressive investors commonly want to match or beat the markets. Or, they are looking to save for retirement at a highly accelerated rate.

Some are “market junkies” who watch Wall Street on a daily basis. Most of them are expecting to build substantial wealth someday.

They tend to be young investors or in the middle stage of life. Most of have NOT been hit hard financially as a result of investing, and many of them have substantial income or savings.

The moderately aggressive investor is willing to wait a bit longer to reach his or her goals, while the aggressive investor tends to be in a hurry by comparison.

The Moderate Investor

Typically, the moderate investor starts investing roughly about the time of major life events – that first stable job with a corresponding 401(k), a marriage, the start of a family.

Often, the moderate investor is a younger investor saving or investing for long-term goals (usually their child’s college education and retirement). These midlife investors frequently have a “balanced” portfolio, with a mix of conservative and riskier investments across varied investment classes. These investors are willing to accept some losses and risks and are pragmatic and usually educated about the realities of investing and their investment options. Some moderate investors are retired or nearly retired, having either retained their investment stance out of necessity (they need to continue accumulating assets in retirement) or out of preference (they do not want to “miss out” when the bulls run on Wall Street).

These midlife investors frequently have a “balanced” portfolio, with a mix of conservative and riskier investments across varied investment classes. They are willing to accept some losses and risks and are understand the realities of investing and their investment options.

Some moderate investors are retired or nearly retired, having either kept their investment stance out of necessity (they need to continue accumulating assets in retirement) or out of preference (they do not want to “miss out” when the bulls run on Wall Street).

What’s your risk number?

Now that you know all this it’s time to figure out your risk tolerance. You can use our free tool to learn what your risk number is. It’s great information to help you build the best portfolio for your goals.


 

Source:
This material was prepared, in part, by MarketingPro, Inc.

 

Beyond Stocks: How to Combat Market Ups & Downs [VIDEO]

We all seem to know a day trader or two, someone constantly hunting for the next hot stock. That’s not what I’d consider smart investing. Here’s why it’s wise to diversify your portfolio:

Diversification Helps You Manage Risk

We all want a terrific ROI, but risk management matters just as much in investing, perhaps more. That is why diversification is so important. There are two great reasons to invest across a range of asset classes, even when some are clearly outperforming others.

REASON #1:

Potentially Capture Gains in Different Market Climates

If you allocate your invested assets across the breadth of asset classes, you will at least have some percentage of your portfolio assigned to the market’s best-performing sectors on any given trading day. If your portfolio is too heavily weighted in one asset class, or in one stock, its return is riding too heavily on its performance.

Your portfolio is like a garden. A good gardener will plant a variety of flowers to ensure something is always blooming. The gardener knows that some flowers eventually die off or may not grow well but if there is enough diversity the overall picture will still look good.

REASON #2:

Potentially Less Financial Pain if Stocks Tank

If you have a lot of money in growth stocks and aggressive growth funds (and some people do), what happens to your portfolio in a correction or a bear market? You’ve got a bunch of losers on your hands. Tax loss harvesting can ease the pain only so much.

Diversification gives your portfolio a kind of “buffer” against market volatility and drawdowns. Without it, your exposure to risk is magnified.

ADVICE:

Don’t put all your eggs in one basket!

Believe the cliché: don’t put all your eggs in one basket. Wall Street is hardly uneventful and the behavior of the market sometimes leaves even seasoned analysts scratching their heads. We can’t predict how the market will perform; we can diversify to address the challenges presented by its ups and downs. 


Sources

  1. usatoday30.usatoday.com/money/perfi/retirement/story/2011-12-08/investment-diversification/51749298/1 [12/8/11]
  2. This material was prepared, in part, by MarketingPro, Inc.

How Will A Clinton (or Trump) Presidency Affect the Market? [VIDEO]

Whoever wins the election, the status quo will likely remain on Capitol Hill. As a Morgan Stanley report commented in July, “Current evidence suggests the U.S. elections in November won’t yield outcomes that substantially change market fundamentals.”

election-thumb-play

 

SCENARIO #1:

What Happens if Clinton Wins?

Morgan Stanley analysts foresee Clinton winning the election and Republicans retaining their majority in the House of Representatives. In that scenario, Clinton wins, but her administration has difficulty enacting any of its planned reforms.3

SCENARIO #2:

What Happens if Republicans Lose Control of the House or Trump wins?

If the Republicans lose control of the House or Trump wins, Wall Street could see some pronounced short-term volatility, which is also an outcome that could possibly affect market fundamentals. Even if one candidate or the other wins by a landslide, their most ambitious proposals may never get off the ground. As Morgan Stanley asserts, “attempts by Clinton or Trump to exercise transformative power domestically will be stunted” by a lack of support in Congress.3

So, What Should You Do?

Should stocks rollercoaster before or after Election Day, keep calm. Any disturbance may be short-term, and your investing and retirement saving effort is decidedly long-term. The election is a big event, but earnings, central bank monetary policy, and macroeconomic factors may have a much bigger impact on the markets this fall.

———–

Sources
4 – This material was prepared, in part, by MarketingPro, Inc.

3 Important Personal Finance Tasks for September [VIDEO]

Here are three things you should be doing this month to keep your financial life on track:

#1 Review Your Credit Report

For the second time this year, download a copy of your credit report from http://www.Annualcreditreport.com. Just remember that each of the bureaus will only give you one free copy a year, so if you received a copy from Equifax in May, pull your report from either TransUnion or Experian now.

#2 Gauge Your Tolerance For Risk

Once a year you want to check your tolerance for risk. “Risk Tolerance is an important component in investing. An individual should have a realistic understanding of his or her ability and willingness to stomach large swings in the value of his or her investments. Investors who take on too much risk may panic and sell at the wrong time” – Investopedia. Market conditions, your age or life events could affect your risk tolerance this this so it’s good to gauge where you are at to determine if changes to your portfolio are necessary. Use my free tool to gauge your current comfort for risk: http://bit.ly/YourRiskNumber

#3 Review Your Asset Allocation

You should have set up the assets allocation in your portfolio at the beginning of the year. Now, you want to check in to see if any of the allocations have drifted and if you need to make any adjustments. If you’re not comfortable doing this yourself I advise you to talk to your CERTIFIED FINANCIAL PLANNER™ and he or she will be able to help you making smart decisions.

Sources:
1.http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
2.http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
3.http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4