Categories for Blog
May 15, 2015 11:30 am
Published by dylan
For some people—especially those with considerable wealth—talking about money is difficult. Some families believe it’s inappropriate to talk about money, or that it’s simply not the kids’ business to know what the family’s assets are. For children with wealth, it’s important to understand the various ways money functions in today’s society.
As trusted advisers we encourage having a well-crafted approach to the “money talk”. In our experience this provides the foundation that will sustain a families wealth and legacy for future generations.
Where to Start: Developing Family Values
Every family’s values are different. Some may be dedicated to philanthropy while others may be about working as hard as you can. The first step is taking a good look at your own behaviors and values:
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Are you consistent about spending, investing, and giving money away?
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Do you tell your kids to spend judiciously but are extravagant on yourself?
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Do you demonstrate the difference between wants and needs?
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Do you have your own written financial plan?
The goal is to help your kids create a purposeful life that reflects what’s important to the family. Additionally, you want to be able to protect your children—and eventually grown adults—from people who might take advantage. The more you know about finance, the less likely your children will be manipulated into investing all their money in a dubious scheme or engaging in illegal activities.
The 5 Key Financial Traits
Financial professionals identify 5 key traits that will help children with wealth succeed now—and in the future.
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Learn how to save. If your kids and grandkids don’t know how to put off instant gratification and save for something meaningful—whether it’s a car or a donation to charity—then there is the potential to squander their inheritance.
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Learn how to manage money. What do you do when you have an inheritance, investment income, perhaps a salary, and possibly employees? What can you do to maximize your funds rather than deplete them? Sure, you can hire financial advisors, tax experts, and staff to manage your wealth. However, hands-on knowledge will help your children to understand the power of compounding interest, how mortgages and loans work, and how to leverage other investments, such as property, to continue to build their wealth.
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How to be paid your true value. Most people enjoy contributing to something useful, whether it’s the family business, a start-up they helped create, or a foundation. Understanding money gives you negotiating skills and insight into the value of your contributions.
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How to handle credit. As a wealth generation and business tool, credit can help you build a financial empire. Used inappropriately, credit can decimate even large estates.
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How to speak the language. Just like other industries, finance, investing, and money management have their own distinct languages. Identifying financial mentors who can present age-appropriate concepts throughout the years will give your children a significant advantage as they begin to spend and invest their wealth.
We believe that families who devote time and effort to understanding and defining their financial heritage will sustain their wealth for generations.
Through heritage planning, we ensure that your family members are prepared to receive their inheritance. We mentor and train your loved ones in money management, leadership, and other key skills. We also encourage communication across all generations, so your family is united in its mission and goals. Find out how talking to your kids now can make a difference for your family for generations to come.
May 5, 2015 10:07 am
Published by dylan
It’s almost graduation time—or possibly the time you’re starting your college search. Given the skyrocketing costs of a four-year college education, some parents and students are wondering if a higher education is really worth the investment. According to employers, it is. Although what one decides to study seems to be less important to businesses than what he or she can bring to the table.
The Association of American Colleges & Universities recently conducted a study that highlighted the five attributes that employers look for in newly minted graduates:*
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Possesses innovation. This is a bit tricky as sometimes “innovation” is more of a buzzword than it is a skill. However, 95% of employers say they give hiring preferences to college graduates with capabilities that enable them to contribute to innovation in the workplace. It’s up to the job candidate to figure out how to add innovation to a project, department, or company. Researching online and conducting informational interviews can provide insight into what innovation means to a specific organization.
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Has critical thinking, communication, and problem solving skills. It doesn’t really matter if a student majored in French or literature, or excelled in math or science. According to the study, 93% of employers said that a demonstrated capacity to think critically, communicate clearly, and solve complex problems is more important than a job candidate’s undergraduate major.
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Has a broad learning background. Also, regardless of major, 80% of employers think that broad knowledge in the liberal arts and sciences is essential. To employers, this shows the broad-based perspective and integrative thinking skills they are seeking for a variety of positions.
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Has an e-portfolio. In the study, 83% of employers said an electronic portfolio goes a long way in exhibiting a job candidate’s talents. Post papers, a senior project, a portfolio, blog or videos—whatever is relevant to the desired position to indicate a student’s skill and proficiency.
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Has real-life experience. Work study, internships, and community service all showcase an ability to add value, prioritize commitments, and work within a team. Classroom learning is beneficial, however, it can be passive and 86% of employers agree that active hands-on learning gives students an opportunity to apply critical thinking, develop team skills and ethical judgment, and further hone their education.
Whether a student decides on pursuing a higher education or not, the bottom line is that it’s more important to focus on knowledge and skills than a specific field of study. Employers want students who can be flexible and adapt quickly to changing demands. The ability to think creatively, solve complex problems, communicate clearly, manage multiple priorities, and work as a team will help students to thrive in a 21st century environment and be successful in their life and careers.
April 15, 2015 8:22 am
Published by dylan
The decline in investors' retirement funds during the economic downturn has made everyone less certain about their future. Now that we've had some time to replenish savings, it's a good time to think about the role Social Security plays in retirement income. It's never too early to plan properly to maximize your benefits.
For many of us, we’ve worked since we were teenagers—at a movie theater, grocery store, restaurant or in a family business. Then we went on to develop careers. All the while contributing to the Social Security system. Still, Social Security remains a bit of a financial mystery for most people.
Here are four main issues to understand about Social Security—and how not to make the most common mistakes:
Mistake #1: Not recognizing how much you may receive. The good news is you may receive more than you anticipated from Social Security. You can receive an annual statement of benefits and plan your benefits here.
Mistake #2: Taking your Social Security benefits too early. “Full retirement age” is an important term. If you were born in 1954 or before, the full retirement age is 66 years old; it gradually rises to 67 for those born after. Of course, you can still work and collect Social Security no matter what your age. However, in the year you reach full retirement age, the government deducts $1 in benefits for every $3 you earn above the limit ($41,880 in 2015).
Mistake #3: Misunderstanding how Social Security can affect you (and your spouse). Whether you are still married, divorced or widowed, you may be entitled to Social Security benefits that are based on:
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Your own earnings record;
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A spouse or ex-spouse’s earnings record;
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A deceased spouse’s or deceased ex-spouse’s earnings record; or
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Whether you are disabled.
It’s complicated to say the least given the wide range of relationships and situations that people experience—coupled with the fact that laws regularly change.
There’s a strategy called “file and suspend” that you can use if you have reached full retirement age, but are not yet age 70. You can ask Social Security to suspend your retirement benefit payments. This way you can receive delayed retirement credits, which can increase your benefits from 5.5 percent to 8 percent per year depending upon when you were born.
Another tactic is to use the “restricted application.” If you are married, or eligible for a benefit on an ex-spouse’s record, once you have reached full retirement age but have not yet claimed your Social Security benefits, you can use the restricted application to claim a spousal benefit. This allows your own benefits to continue to grow up to age 70.
Or, you can combine both strategies. If you and your spouse are of full retirement age, but one wants to work until age 70, a spouse can file for retirement benefits now and have the payments suspended, while the other files a restricted application for only the spousal benefits. This strategy allows both of you to delay receiving Social Security benefits on your own records so you can earn delayed retirement credits. Note that the IRS requires that, in order to file for spousal benefits, the other spouse must have established a filing date.
Because everyone’s situation is different, we suggest that you consult a qualified advisor to help you plan your Social Security strategy.
Mistake #4: Not realizing how Social Security may impact your taxes. In a perfect world, being eligible for Social Security would exempt you from taxes. Think again. Some people may have to pay federal income taxes on their Social Security benefits if they have qualifying income, such as wages, self-employment, interest, dividends and other taxable income.
What’s important to know is that you can lose up to 85 percent of your Social Security benefits if you don’t plan ahead. It’s called the “tax torpedo,” and it can eat up a significant portion of your hard-earned money.
You don’t have to be making a substantial income to be subjected to this tax torpedo – even those with modest incomes can take the hit. Once a low-income threshold is met ($25,000 for singles and $32,000 for married couples), up to 50 percent of Social Security benefits will be taxed. At a second threshold ($34,000 for singles and $44,000 for married couples), up to 85 percent of Social Security benefits will become taxable.
Depending on your situation, there’s a high likelihood that your Social Security benefits will be taxed. However, delaying your Social Security benefits may help avoid the tax torpedo. You will also gain from building a substantially larger Social Security fund for yourself, as well as your spouse. This may mean relying more heavily on your retirement investments, though. A qualified financial advisor can help you determine how taxes may impact your Social Security benefits and when is the best time to take them.
We’ve all paid into Social Security and it can be a substantial income resource in your retirement years. You can choose to live off the proceeds, invest your Social Security income, or help fund an educational or other type of trust. Navigating the Social Security landscape—in addition to your other investments—can be a challenge, but with proper financial planning it doesn’t have to be.
March 6, 2015 10:29 am
Published by dylan
The last time the Nasdaq Composite Index was at 5,000 (in March 2000), global stock prices peaked and subsequently unraveled very rapidly. Just one year after the peak, the Nasdaq was trading 60% lower. By October 2002, the index hit bottom with a nearly 80% loss. It was a spectacular fall. Portfolios suffered around the world and it would take years to rebuild them.
Fast-forward 15 years and here we are again. The Nasdaq is at the 5,000 milestone and investors want to know if we’re at a new market top and if they should sell to protect capital. At JJ Burns & Co., we don’t believe today’s Nasdaq will travel the same road it did in 2000. There are many big differences between 2000 and 2015.
2000 vs. 2015
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In 2000, earnings did not matter. Back then the 20 largest companies in the Nasdaq had an average price/earnings ratio of 395 (trailing 12 mos. earnings). In 2015, the top 20’s average is 108. Remove Amazon and eBay from the equation and 2015’s average drops to 27. Still pricey, but based on some real earnings figures.
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In March 2000, the top 20 stocks earned a collective $26 billion in the trailing 12 months. In March 2015, they earned $167 billion.
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In 2000, the Nasdaq’s average company age was 15 years. In 2015, the average is 25 years.
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Nasdaq 5,000 in 2000 is not the same as 5,000 in 2015. Sure, they’re both at the 5,000 level, but you have to adjust for inflation to make an “apples-to-apples” comparison. When doing so, the Nasdaq would have to be at 7,000 today to be equal to 5,000 in 2000.
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The Nasdaq’s top 10 stocks are different. In 2000, Microsoft was the biggest stock in the Nasdaq, sporting a frothy P/E ratio of 57. In 2015, Apple is the biggest with a significantly more reasonable P/E ratio of 15.
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In 2015, Apple, Cisco, Google and Microsoft have more than $360 billion in cash combined. That’s nearly 25% of all U.S. corporate cash reserves.
The Big Picture
The Nasdaq is a popular, technology-focused index (about 42% is tech). As such, it’s not a good representation of the overall market, due to its lack of industry diversification. That’s why professional money managers and we at JJ Burns & Co. don’t use it as a benchmark for performance comparisons, and why you shouldn’t use it as a buy/sell barometer for your overall portfolio.
This doesn’t mean we should ignore the Nasdaq altogether. The index is pricier than the more widely followed S&P 500, and there are sectors of the Nasdaq that are arguably approaching risky levels. Also, Apple is the largest stock positon in the S&P 500 and the Russell 3000; the social media sector has been on a tear, and biotechs have been a leadership group for a long time.
Nonetheless, we are not worried about the Nasdaq revisiting 5,000. The level today has a different risk profile than it did in 2000, so investors should focus on why they own stocks in their portfolios and stay disciplined with their allocations.
February 22, 2015 7:39 am
Published by dylan
Joan Rivers, Robin Williams, Philip Seymour Hoffman and Mike Nichols. They’re all industry legends. We’ve been entertained by them for many years and miss their unique talents, wit and spirit.
They were incredibly talented, creative—and most would assume financially successful. However while bringing home or being nominated for that elusive Oscar—some may not have won an award for their financial planning.
The old adage about death and taxes rings true—and no matter what your profession or income, life can be complicated. Whether you’ve had a long-enduring relationship, kids, several spouses, just as many houses and businesses (and did we say grandkids), without a solid estate plan in place, all your hard work can be for naught without some financial forecasting.
Time is On Your Side
The earlier you plan and the earlier you save, the better you are able to face financial downturns. Joan Rivers and Mike Nichols had time on their sides to build their incomes over long careers, as well as solid financial plans in place. They created strategically designed business and estate plans (not to mention having adult children) which made the transfer of assets at their deaths that much easier. Philip Seymour Hoffman and Robin Williams had different family situations that may have made their estates a bit more complicated.
Of course, no one wants to think about what happens “when I die.” However, planning for the expected—as well as the unexpected—will help give you a greater peace of mind.
Ways to Take Action Now
So what can you do now to help secure your financial future? Here are five suggestions to shape your strategy.
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Leave a legacy that reflects your values and priorities. This is usually created in the form of a trust, and is an opportunity to tell your story. There are a number of ways to have your wishes heard and directed through financial planning. Also, homes and businesses owned within a trust may be protected from certain liabilities and can be afforded tax advantages.
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Consider the differing needs and situations of your loved ones. Every family is different. You may wish to pass on your business to your children, set up educational funds or care for a special needs relative.
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Streamline your estate management. Estate taxes, plus federal and state taxes can eat up your assets quickly if you don’t plan ahead. In 2015, personal estate tax exemptions are $5.43 million per individual. With professional financial planning, you can avoid the hassle of probate and the time it would take for your heirs to resolve your estate.
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Maximize your charitable giving. Many people wish to leave a legacy for their families as well as to community organizations. From donor-advised funds to charitable planning, you can maximize the impact of your donations.
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Make plans for the unexpected. An important part of financial planning is to specify your end-of-life preferences. While some people may find this a bit morbid, it’s good to know that you can have control over your estate, your medical treatments, who can help make decisions and other vital issues before you need them. A living will combined with an advanced health care directive can take care of most of these basics.
Enjoy the Academy Awards—and give yourself an award for whatever you do best. Everyone’s situation changes throughout the years—marriage, divorce, death, birth, new job—and that’s just the first level of what to consider. Now is the time for a quick financial planning checkup to learn more about how to make your plans for the future a reality and create the legacy you wish to leave.
February 10, 2015 3:50 pm
Published by dylan
The first 5 weeks of the New Year have been pretty volatile for most markets; clearly, last year’s news has brought volatility back. Many strategists have been “pounding the table” on stocks and declaring that the Large Cap US Equity Market will continue to lead the way in 2015. Although possible, we believe that broad diversification is still the key to long-term success. This philosophy means we will continue to have exposure to small cap, mid cap and international securities, even though they trailed US Large Cap equities last year. We just received an interesting piece from Louis Navellier of Navellier & Associates. A long-time market analyst and portfolio manager, he notes:
The biggest news last week was crude oil rallying 19% from its lows in just four days, which sparked a big rally in some beaten-down energy stocks and other stocks that have been beaten down by a strong U.S. dollar. By Friday, most major market indexes had made up for all of January's declines. But here is the real conundrum the stock market now faces…of the 20 stocks that account for approximately 30% of the S&P 500's total value, too many — like Caterpillar, Chevron, Coca-Cola, DuPont, ExxonMobil, IBM, McDonalds, Microsoft, General Electric, Goldman Sachs, JPMorgan & Co, Pfizer, Procter & Gamble, and even Google have all missed analyst estimates and/or issued cautious guidance below analyst estimates… essentially what is happening is that a strong U.S. dollar is squelching sales of large multinational companies and squeezing their underlying earnings. A massive flight to more domestic stocks with real sales and earnings growth is now underway, so I expect the stock market will get increasingly narrow in the upcoming weeks.
Since the brief U.S. market correction last fall, investors have had to adjust to new information and possibly reposition portfolios with respect to:
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The increasing strength of the U.S. dollar
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A precipitous decline in crude-oil prices and gasoline, followed by a brief but sharp rally in 2015
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Changes in European Central Bank policy that are expected to lead to expansionary moves similar to those taken by the U.S. Federal Reserve Open Market Committee following the financial crisis.
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A repricing of some commodities that react to changes in inflation expectations and the dollar such as gold.
Navellier also noted that the previous time a ‘leadership change’ occurred in the U.S. markets was a mega-cap retreat in the early 2000s following the Tech Bubble. He goes on to say:
The S&P 500 has gotten too top-heavy once again…the bottom line is that we are now unquestionably in an increasingly narrow stock picking market, and the "sweet spot" in the stock market is moving down the capitalization ladder to the mid-capitalization area.
Time will tell if this analysis is correct. However, we agree with the thesis, and think this is a good time for rethinking exposure to international stocks as well, which might expect a boost in revenues and favorable exchange rates against the U.S. dollar. The best news, however, is that many of our clients are in portfolios that are diversified across the U.S. market-cap spectrum (including mid- and small-cap stocks), and have international exposure as well. We appreciate that 2014 was a trying year for many investors, but we’re pleased that we already have many of the security exposures that might prevail going forward. For more on the markets over the last two years and how some investors fared, please see our 2014 year-end review.
December 19, 2014 12:35 pm
Published by dylan
Certain situations in life are governed by what I call ‘ the playbook.’ In economics, the playbook says that falling interest rates will always stimulate growth and inflation, which are necessary for countries to grow GDP and spending. It also says that falling oil prices are generally a great boost to the global economy. Experience, however, tells us the playbook isn’t always right. Falling oil prices aren’t shaping up as the cure we would normally expect in a weak global economy.
The article below addresses risks and opportunities and offers a quick brief on what lower oil prices mean to investors, producers and consumers around the globe.
Financial Times: Winners and Losers of Oil Price Plunge
October 17, 2014 12:13 pm
Published by dylan
The past six weeks or so, since the beginning of September, have been pretty unsettling for stock market investors. After three years of annualized price returns between 18% to 19% per year for U.S. large-cap and small-cap stocks through the end of August, the period from Sept. 1 to yesterday’s close has seen declines of about 7% for stocks of all types. That matches the worst multi-month decline over those three years for most stocks. (Small-cap stocks had a maximum decline of about 11% in the fall of 2011). International stocks didn’t fare as well over that three-year period, and have performed worse than U.S. stocks over the past six weeks. Does this mean the bull market is over and people should sell stocks? Far from it.
All markets need some volatility to make price discovery and investment research viable. No market – bonds, stocks, gold, oil or real estate – goes up year after year without some reversals. Markets are also wired to accept bad news more than good; by that, I mean traders and investors always look for a dark cloud, even when news or data releases are good. For example, U.S. investors have had to digest the following events and issues over the past few months: an Ebola virus outbreak, economic weakness in Europe, slowing growth in China, continued tensions between Europe and Russia over Ukraine, multiple wars in the Middle East and the ongoing dissatisfaction with the state of U.S. domestic affairs topped off by a looming mid-term election. But if we examine the facts, here’s what we see:
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U.S. household net worth has rebounded to a level 20% higher than the peak prior to the decline in 2007.
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Total debt for households and nonprofit organizations equaled 77% of gross domestic product, the lowest level since 2002. Declines in household liabilities are mostly due to lower mortgage debt.
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The federal budget deficit is falling.
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Oil declined to a near four-year low, and average gasoline prices are down 13% from a high in April, potentially putting more money in consumers’ pockets right before the holiday season.
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Predictions now are for a milder winter this year compared to last; with potentially lower heating fuel prices, that’s good news, too.
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The dollar has climbed 5% since June, making imported goods look more attractive.
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Unemployment is lower, more people are working and wages are beginning to rise in some sectors.
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Interest rates are low and have declined in spite of constant predictions of a rise over the past 5 years.
There are always a broad range of views about any event, positive or negative, that offer likely outcomes and their potential impact on the financial markets. Investment professionals struggle to consistently add value for clients by correctly analyzing the result of all of these constantly changing macroeconomic events. History, however, suggests that those looking for certainty around such events before investing could be setting themselves up for a long wait. There is always something to worry about. Is risk being appropriately priced? Are prices being kept too high and is volatility being unnaturally suppressed by the central banks? Will Europe rebound, and when? Who will triumph in all the military struggles we’re watching? Will China really manage a ‘soft landing’ for its overheated economy? Will there be an Ebola epidemic in the U.S.? What is the average investor supposed to make of all this conjecture?
We believe there is a much simpler approach. It begins by accepting that the market price for an investment is a fair reflection of the collective opinions of millions of market participants. This means we do not bet against the market, we work with the market. We build diversified portfolios around what is known of expected returns according to your particular circumstances and risk profile. It does not mean constantly reacting to the opinions of market pundits about what might happen tomorrow, next week or next year. Nobody – repeat, nobody – knows what will happen. Staying disciplined and focusing on the things that you can control, which are asset allocation, regular portfolio rebalancing and investment expenses, are the key ingredients for long-term success. Our signal for rebalancing your portfolio is the need to maintain or adjust YOUR asset allocation, not media speculation and fear-mongering. Remaining calm and focused on this strategy allows us to benefit during periods of volatility.
Is volatility back? Yes. Are we worried? No.
October 10, 2014 6:14 am
Published by dylan
The stock market is reminding everyone that progress is always made in fits and starts. While the market overall is higher for the year, the Dow Jones Industrial Average was off 1.4% in September and has slipped more than 3% since peaking on Sept. 19; the Nasdaq Composite Index off more than 4% since early September.
There's been a lot of handwringing over the small-cap Russell 2000 Index's 10% decline since peaking in July -- which means it's in a correction. The Wall Street Journal noted there’s concern that the Dow hasn't suffered a sustained fall of 10% or more in over 700 trading days, the fourth-longest streak since 1945. Furthermore, Europe is showing more signs of weakness as the dollar is increasing in value.
We suggest everyone relax a little though; here's why:
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The stock market usually experiences at least one big pullback a year. So what's happening now isn't out of the ordinary and isn't that big. For example, the Dow fell 5.3% in January.
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Pullbacks end. The fourth quarter has shown decent gains in 11 of the last 14 years.
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The economy is stronger, no matter what you hear. A stronger economy should mean better profits for corporations, which means stocks should rise.
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There are more jobs and a higher “quit rate” which signifies workers are confident they’ll get better employment as more jobs are available.
We at JJ Burns & Co. believe short-term trading is gambling, pure and simple, and we're not gamblers. We don't believe investors should worry about the market's daily gyrations except to look for long-term bargains. As the Dow was falling 238 points last Wednesday, Berkshire Hathaway's Warren Buffett told CNBC on Thursday he bought stocks.
While it is true the stock market is not having a big year, remember that 2013 was a home-run-year, with the Dow up 26.5% and the Standard & Poor's 500 Index up 29.6%. Moreover, the Dow has risen more than 155% since March 2009, the low of the financial crisis, and the S&P 500 is up more than 185%.
It's the long run that's key for us and should be for you. Stocks (and capitalism) are the best long-term inflation and growth vehicles. Period.
We think the economy's long-run prospects are good, and we're about helping our clients tailor their investments to be long-term winners. If you worry too much about what the stock market does day-to-day, you probably don’t have the right asset mix and you're letting your emotions dictate your investment decisions. So take a little time to examine your position critically. Try to understand how the components of your portfolio will perform if the downturn turns into a broad correction. Then make sure your investments are diversified enough to weather the storm and set up to generate long-term growth.
Finally, it's OK to be tactical, like Warren Buffett, and periodically look for bargains that will pay off over the long-term. That’s what good investing and strong wealth management is all about.
August 8, 2014 9:29 am
Published by dylan
In early August, the stock market has looked a bit rocky. The major averages fell in July and have begun this month by moving lower again. Not a lot, but enough to get your attention. The fact is the Dow Jones Industrials Average, the Standard & Poor's 500 Index and the Nasdaq Composite haven't fallen together for two straight months since the summer of 2011.
There is talk that Russia's escalating tensions with the Ukraine and the battle between Israel and Hamas in Gaza will push oil, gasoline and winter heating costs higher. There's also been increased chatter about when the Federal Reserve may start to raise interest rates due to a seemingly improving U.S. economy.
Does This Mean The Bull Market Is Over and You Should Sell?
Smart, disciplined thinking and planning can get you through this unsettled market. What we know, and research confirms, is that investors who make buy and sell decisions based on emotions are regularly wrong.
According to research from the Investment Company Institute (http://www.ici.org) and Fidelity Investments, starting in the late 1990s, too many individual investors bought stocks when prices were rapidly rising and then lost a bundle when the market crashed in 2000-2002; this process was basically repeated, but for different reasons, again in 2008-2009. They then shied away from stocks when panic selling was clearly evident, especially in early 2009, and missed one of the great rallies of all time. The S&P 500, even after a recent pullback, is up 180% since the March 2009 bottom.
To look at the data below showing investors constantly selling equity funds and buying into bond funds, is really shocking. Many investors who need stocks in their portfolios have missed out on a great rebound, only to start to put money to work again at a new market inflection. In fact, the smart play is to think like a contrarian and trim back on equities when the market is booming and start to buy when it's clear that a correction, or, in the worst case, panic selling has set in.
Historical Pattern of Flows Interrupted
When markets have more volatility the graph clearly shows how the flow of funds enter and exit stock and bond investments. The behavior of most investors shows a herd mentality that reflects a lack of discipline in sticking to a well-thought-out plan representative of their goals.
Fundamentally, this data tells us that great investors are:
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Contrarian
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Disciplined
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Long term in focus
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Seek value, not trading, to grow wealth
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Don't panic or move too far from strategic targets
Be a Natural Contrarian
It’s important to understand the consequences of making emotional decisions and not maintaining a disciplined plan. When fear or frustration set in, emotions tend to guide decisions. This is how most investors wind up taking on more portfolio risk than they may need.
At JJ Burns we encourage you to revisit what you want your future to be and make certain your plan will help you achieve that goal. The fundamental core of successful financial planning is to always keep your goals in mind and allocate your investments to the best level of expected return and risk that's right for you. We're here to guide you with a customized plan that should be regularly reviewed when "cooler heads" prevail in irrationally exuberant or depressed markets.
July 7, 2014 11:27 am
Published by dylan
Building the wealth you need to meet life's challenges requires imagination, focus, discipline and time. The process is more complex than ever before because the economy has become so volatile. The task can look daunting, but your odds of success are better if you follow these ten steps:
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Develop a plan. What are the results you want to achieve? Identify your values, priorities and dreams. Then work backwards so that you have a plan with the ultimate goal firmly in focus. Make sure your goals are realistic and attainable, and that you’ve identified the potential challenges, consequences and risks.
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Execute YOUR plan. Creating a plan is one thing, executing the plan is something else. Your investments should be customized to your needs, so don’t compare your portfolio to those of your friends. Wanting what other people have will never get you what you ultimately need.
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Pay yourself first. Yes, it's a cliché, but it is also true. If you have the opportunity to participate in a workplace savings plan, maximize your contributions before you take any pay for yourself. There are good reasons for paying yourself:
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Employers often match a percentage of your contributions. It’s free money, so take advantage of it.
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By contributing to a savings plan, you get used to not having the money – and not spending it. It gives your funds the opportunity to reap the benefits of compound interest.
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Contributing to a workplace savings plan allows you the benefits of dollar-cost averaging. That means you’re making regular contributions to your plan, regardless of what may be going on in the financial markets, and reducing your exposure to market volatility.
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Don’t be too conservative. With today's low interest rates, it makes no sense to invest all of your money in a bank account or in savings bonds. You simply won't be able to build true wealth. You have to take some risks and learn to be comfortable with them. Investing in a properly diversified portfolio can help you strive for higher returns while also limiting some of the risk of markets. When market drawdowns occur, take advantage of rebalancing your portfolio.
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Don’t swing for the fences either. Get-rich-quick schemes are just ways to lose money quickly. For every great business investment, there are five that fail. If you hear someone say he has a "can't fail" investment, be skeptical. Be very skeptical. Look for experts who can vet the idea and help you decide if it's real or a delusion.
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Pay attention to the little things. Over time they add up. Make your own coffee instead of stopping at the gourmet coffee shop. Prepare your lunch at home and bring it to work. You can have fun and still limit your spending. Invite your friends over instead of going out. A special romantic dinner can be more meaningful when you make it together, at home.
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Make saving a family affair. Educate your children and create a legacy by saving for things that are meaningful. Share the plan with your family and have everyone participate in the success of hitting a financial goal together.
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Get professional advice. A Certified Financial Planner professional can help you clarify your goals and identify any gaps in your financial life. He or she will help you construct your personalized, comprehensive plan that takes into account your cash flow, assets, savings and insurance needs, while keeping in mind your goals for retirement, your estate and the legacy you hope to pass on. Expert help can involve costs, but good advice more than pays for itself.
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Revisit your plan. Of course life isn’t static – and neither is your plan. Your needs and goals may change over time. There will be inevitable bumps in the road and unexpected developments and detours. At times you’ll need to reevaluate your financial strategy and make adjustments.
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Remember, wealth is not just about money. Wealth is much more than your net worth. It’s about family security, meaning and purpose. It’s about living life on your terms.
The economy may be volatile, just like the ocean. Your plan will help you navigate safely and allow for course corrections along the way. The challenges apparent in the global economy may very well end up being opportunities to build your wealth.
May 22, 2014 12:09 pm
Published by dylan
Long-term care insurance policies are a valuable resource for many people. They provide funds to pay for home care and nursing home expenses for an extended period of time. As our baby boomer clients and their parents age, we have witnessed how the benefits have protected the assets and lifestyle of families.
In the last few years, insurance companies have been asking regulators to approve premium increases for older-issued (8 to 10 year old) policies. Simply stated, the insurance companies are not collecting enough in premiums to cover their expected future liabilities to provide care. As a result, an increasing number of policyholders are receiving notifications of significant premium rate increases.
The 3 main factors behind these premium increases:
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Insurers overestimated the number of policyholders that would drop their coverage
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Costs of home health care and nursing home care has significantly increased in recent years
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The low interest rate environment has reduced insurers’ ability to earn income on investments backing their policies
Your Options When Faced With A Premium Increase
Look for new coverage. Your first reaction may be a desire to drop your coverage and try and find a new carrier. However, often times it is unlikely that you will be able to purchase a new policy at a better rate, especially if you are much older or your health has deteriorated. Additionally, new policies being issued today are being done so at much higher premium rates than they were even 5 years ago.
Change your coverage. If you do not want to pay the increased premium cost, you may want to consider modifying your coverage by lowering your benefits, decreasing your inflation protection, or shortening the years of coverage. It is important to note however, that once you reduce your benefits, you cannot re-establish the original benefit.
Pay the increase. Depending on the size of premium increase and your ability to absorb the cost, it may be advisable to pay the new higher premium because the coverage is quite valuable. This becomes an individual decision for each policy holder based upon current assets they have saved, income available to pay the additional cost and their current health.
Drop your coverage: If your wealth has grown beyond the need for coverage, it may be time to eliminate the insurance. It's important to determine if your assets can support a home or nursing care expense.
Insuring Your Future
Planning for long term care involves more than just insurance. I was recently interviewed for a segment of On The Money with Sharon Epperson of CNBC to discuss long term care insurance and whether the price is worth the protection. Whether you’re faced with an increase in premium or evaluating the benefits and costs of long term care insurance for the first time, it is important to start by looking at your overall financial plan. Once you understand all of the wealth management gaps in your life, you can then do a thorough analysis and make an informed decision. How your assets are owned is a key component to planning and should always be part of the process. The last thing you want to do is add an unnecessary expense without a thoughtful plan.
If you have any questions about the gaps in your wealth management plan, contact our office at 631-390-0500.
