Journey Financial helps you with retirement planning, college savings, estate planning, tax planning, investments

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Acton, Bedford, Burlington, Lexington, Lincoln, Maynard, Waltham, Westford
in MetroWest Massachusetts

 

 

 

 

 

 

 

 

 
 
 
 

Journey Financial Blog

Posts Tagged ‘Investment Style’

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When Financial Advice Is Need – Triggering Events

Wednesday, August 18th, 2010

The Value of Advice: Report July 2010

Investment Funds Institute of Canada

Here’s a brief summary of the main findings:

“In this Report we have looked at the financial and investment advice business…and identified some of the principal values that investors derive from the relationships they have with their advisors….

  • Most Canadians find that they lack the financial knowledge, or the time required, to research all the options available to them
  • Advisors help their clients make the important financial decisions they need to make at critical points in their lifetimes (see chart below)
  • Advisors assist in the setting of planning targets; the choice of the right vehicles to reach those targets; and the development of asset allocations matched to client needs
  • Having advice is strongly associated with the accumulation of financial wealth regardless of income level or age of household
  • Advised households save more, regardless of income and age, than their non-advised peers
  • Advisors help choose the right asset mix for an individual client’s circumstances, objectives, and risk tolerance
  • Advisors help their clients to adopt good savings and investment behaviors early in life and to maintain those practices through their lifetimes
  • Advised investors are more confident about their future than non-advised households
  • Investors who work with an advisor are 33% more likely to feel empowered and educated than those who invest without advice
  • Investors using advisors are much less likely to be the targets of fraud than those who do not use advice
  • When times get tough, individuals trust their advisors for financial advice - even on financial questions outside of their immediate business relationship
  • Advisors provide highly durable values, such as the values learned about adopting early in life a savings and investment culture, avoiding common behavioral investment errors, and understanding the benefits of a financial plan. “

 

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Posted in 401k plans, Avoiding Risk, Estate Planning, Financial Habits, Financial Planning, Investment Advice, Investments, Lifestyle, Parents, Retirement, Taxes | No Comments »

Bond ETFs – make sure you know what you are doing!

Monday, July 26th, 2010

There are no short cuts.  You have to do your homework.  Whether hiring someone or investing on your own, you need to know what you are doing.  Here is another example of how do it yourselfers might get tripped up. 

WSJ March 1, 2010

Bond ETF Buyers Must Stay on Guard for Hidden Risks

“Investors seeking safety have been pouring cash into bond funds over most of the past year. While that can be a sound if not lucrative strategy when it comes to mutual funds, exchange-traded bond funds bring the risk of limiting gains or magnifying losses.

ETFs are seen as liquid, transparent investment and trading vehicles. But liquidity issues make most bonds a poor fit for ETFs, so an ETF’s share price, dictated by market demand, is often different from its net asset value. As a result, investors often aren’t buying and selling fund shares at levels close to their true value.”

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Posted in 401k plans, Avoiding Risk, Business Owner, Company Retirement Plans, ETFs, Employer, Fiduciary, Financial Planning, Fixed Income, Investment Advice, Investments, Plan Sponsor, Retirement, Taxes, Uncategorized | No Comments »

The pleasure principle

Monday, July 26th, 2010

Watch out for your lizard brain… and remember most professionals all think the same.  They went to the same schools, they worked for the same firms and they all golf together.  Journey relies on science – not speculation.  It’s hard not to be driven by your emotions, that is one of the best reasons to have a plan – and stick to it.  As Warren Buffet says, be greedy when others are fearful and fearful when others are greedy.  It’s amazing how few have the strength to follow through. Be one of the few, the proud, the brave!

So That’s Why Investors Can’t Think for Themselves

June 19, 2010

From February through May, the Dow Jones Industrial Average gained more than 1000 points in an almost uninterrupted daily march upward. Then came the “flash crash” of May 6 and day after day of losses through May. Now, in mid-June, the market has been up six of the past seven days.

What accounts for these sudden moves? Why do investors so often seem to resemble a school of fish, all changing direction together?

Sometimes the most interesting answers to financial questions come from scientific labs. A study published last week in the journal Current Biology found that the value you place on something is likely to go up when other people tell you it is worth more than you thought, and down when others say it is worth less. More strikingly, if your evaluation agrees with what others tell you, then a part of your brain that specializes in processing rewards kicks into high gear.

In other words, investors often go along with the crowd because—at the most basic biological level—conformity feels good. Moving in herds doesn’t just give investors a sense of “safety in numbers.” It also gives them pleasure.

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Posted in Avoiding Risk, ETFs, Fiduciary, Financial Habits, Financial Planning, Investment Advice, Investments, Lifestyle, Plan Sponsor, Retirement, Uncategorized | No Comments »

Muni Bonds – Are they too risky?

Monday, July 26th, 2010

 

No, but diversify with a muni mutual fund if you don’t have at least $500,000 for your muni bond investments.  Look at well diversified short to medium duration low expense mutual funds.  The transaction costs and insufficient diversity isn’t worth the cost or risk of investing in individual bonds.  The good news is some new funds and etfs are designed to hold the bonds to maturity to minimize rising interest rate risk.

WSJ June 29, 2010

Muni Bonds: Don’t Hit the Panic Button Yet

“The drumbeat of anxiety over municipal bonds is getting louder, with headlines screaming about state budget deficits and talking heads—Warren Buffett among them—expressing alarm over the ability of issuers to make good on their debts.

How worried should small investors be?”

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Posted in Avoiding Risk, ETFs, Fiduciary, Financial Habits, Financial Planning, Fixed Income, Inflation, Investment Advice, Investments, Plan Sponsor, Taxes, Uncategorized | No Comments »

The ins and outs of Target Date Funds

Monday, July 26th, 2010

There are no standards for Target Date Funds.  Some are designed to get you to retirement, other through retirement.  Be careful because two different funds may claim to be target date funds for the same year such as “2030″ but one may be to 2030 and the other through another 30 years for someone retiring in 2030.  Even funds that are similar in their goals may have radically different composition of asset classes and hence risk profiles.  It is important to look under the hood and understand what your target date fund is designed to do and for what time period.  And always look at fees!

WSJ

June 7, 2010

Before Buying a Target-Date Fund…

“Target-date funds drew a lot of criticism during the bear market for big losses. Whether or not the criticism was deserved, one thing is clear: Average investors need to better understand the risks and benefits of these popular retirement-savings vehicles….”

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Posted in 401k plans, Avoiding Risk, Company Retirement Plans, ETFs, Financial Habits, Financial Planning, Investment Advice, Investments, Lifestyle, Retirement, Uncategorized | No Comments »

Clients are not pleased with Wall Street Advisory Relationships – relationships moving to independents

Sunday, June 20th, 2010

Investors are starting to look up and around at other options for their money management.  The inevitability of going witha Wall Street bank or brokerage firm is no longer an appealing option let alone the only option.

Investment News

May 30, 2010

Bridging the gap

RIAs are rushing in to fill the widening gulf between big banks and their clients

 “…“Large, sophisticated families are questioning whether these institutions can continue to be trusted, and it’s driving them to us,” said Michael Zeuner, senior executive partner at GenSpring Family Offices LLC. “They’ll still work with those traditional advisers, but they need someone like us to oversee them.”

Executives of both firms credit their growth to an increased awareness by wealthy investors of differences between fee-only and product-based providers, and to a better understanding of how fiduciary standard of care requirements differ from a broker’s suitability standard.

“Much of our new business comes from people who were with a big financial services firm that helped take them public or had another corporate relationship but now want independence, objectivity and transparency,” said Mr. Francais. “Perhaps the Goldman situation has highlighted some of the conflicts potential in those environments.”

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Posted in Avoiding Risk, Fiduciary, Financial Habits, Financial Planning, Investment Advice, Investments | No Comments »

Hedging your Roth Conversion

Sunday, June 20th, 2010

For those who like to minimize their risks this will be of interest to you.  Thoroughly think through your moves by considering a range of possible outcomes.

March 1, 2010

Convert existing IRAs into multiple Roths

Strategy could be a tax saver if investor wants to switch back to traditional IRA in the future

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Posted in Avoiding Risk, Cash, Financial Planning, Investment Advice, Investments, Roth Conversions, Roth IRA, Taxes | No Comments »

Tax and Estate Planning Strategy Changes Likely

Sunday, June 20th, 2010

For those who are fortunate to have such planning challenges… no sleeping at the wheel!

Investment News

April 5, 2010

Wealthy might have to kiss their GRATs goodbye

Legislation would make the tax-saving trusts much less favorable

“…GRATs are a trust with a specific life or term that allows a wealthy person to transfer more money to heirs than they otherwise could under the “$1 million in a lifetime” rule.

With the strategy, an asset is placed into a trust by a grantor, who then takes back an annuity, which is made up of the asset value plus a variable interest rate.

GRATs work best when the asset appreciates more than the interest rate, a hurdle which has been easy to leap recently because rates have been so low. This month, for example, the rate is 3.2%, and any appreciation beyond that goes to a grantor’s heirs when the term of the GRAT ends, as a tax-free gift.

Shorter-term GRATs — typically two or three years — have been most appealing because the asset may appreciate quickly, and the investor is not likely to die over the life of the trust, an event that would force the entire asset back into the taxable estate….”

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Posted in Avoiding Risk, Business Owner, Estate Planning, Fiduciary, Financial Planning, Inflation, Investment Advice, Investments, Lifestyle, Parents, Taxes | 1 Comment »

Be very careful as to WHAT you convert, RMD’s are big No-No

Sunday, June 20th, 2010

Tripping up will be very costly, so convert carefully and make sure you are doing it right.

What Can’t be Converted to a Roth

Investment News

April 5, 2010

The tax code allows only eligible rollover distributions to be converted to Roth individual retirement accounts. That means that besides required minimum distributions, there are a number of other items that can’t be converted. These include 72(t) payments, hardship distributions, corrective distributions of excess deferrals, deemed distributions (i.e., defaulted plan loans, though plan loan offsets are eligible for rollover) and dividends from employer securities. In addition, funds in an inherited IRA are not eligible to be converted to a Roth IRA.

How about cash? You can’t simply take $100,000 from the bank or from the sale of an asset and convert it to a Roth IRA; that $100,000 is not an eligible rollover distribution. You may be able to contribute up to $5,000 per year ($6,000 if 50 or older) to a Roth IRA, but you must have earned income, and there are income limitations (even though no such limitations apply to making contributions to a traditional IRA). Although the Roth IRA conversion limits have been repealed, the Roth contribution limits are still in effect.

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Posted in Avoiding Risk, Cash, Estate Planning, Fiduciary, Financial Planning, Investment Advice, Investments, Retirement, Roth Conversions, Taxes | No Comments »

Don’t be duped about fund performance

Sunday, June 20th, 2010

No one thinks they are susceptible to the power of advertising, but don’t be fooled, even if you think you are really smart and sophisticated.  The issue is the advertising has hijacked your emotions even before your thinking brain has a chance.  When markets improve the fund companies tout performance, the thing is, past performance is actually more likely to indicate the opposite in future performance… Why is that?  Last year’s hot asset class is rarely this year’s hot asset class. Don’t buy it!  It’s the portfolio allocation that drives your performance, not a hot fund. 

Wall Street Journal

April 22, 2010

When Ads Say Skill, Think Luck—Report

Performance Is Called Mostly Irrelevant

“…The problem, the critics say, is that performance ads broadly give the false impression that a fund’s past returns should be an important consideration. In fact, strong-seeming returns are almost always attributable to luck, so funds’ past performance is largely irrelevant, unlike other factors, such as investment fees, that do reliably influence long-term results.

Academics and professional investors typically acknowledge that seemingly counterintuitive dynamic. But small investors, confronted with marketing campaigns that foster the opposite impression, have been slow to catch on.”

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Posted in Avoiding Risk, ETFs, Fiduciary, Financial Habits, Financial Planning, Investment Advice, Investments, Taxes | No Comments »

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