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Charity Navigator — The Smart Way to Give

  • May 25, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Charitable Donations, Scams & Schemes, Seeking Prudent Advice

charity-navigatorGiving to our community to help make this world a better place is very important, but how do you know if you’re contributing to a reputable organization that will make the best use of your donation?

Charity Navigator (charitynavitagor.org) features a rating system of 1 to 4 stars for dozens of charitable organizations.  This non-profit provides key guidance on where it’s best to give and how these charities utilize the money that you give them.

A four-star charity has the following characteristics:

  • it excels at its financial health
  • spends most of its money on its charitable programs (not administration or fundraising)
  • completes an annual financial audit
  • guarantees donors it won’t sell their names to outside parties (i.e., it protects its donors privacy and respects their time)

The best way to donate is to give directly to the charity through their website.

The worst is donating to “cold calls” from a telemarketing firm.  The middleman typically keeps 80% to 90% of your contribution and shamefully little actually reaches those in need.  Also, avoid appeals delivered via social media because you don’t know who is behind them.

Sources:
Charity Navigator
NPR


Not Googling a New Financial Advisor, Seriously?

  • May 19, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Scams & Schemes, Seeking Prudent Advice

It’s hard to believe, but there are people who sign on with a new financial advisor without bothering to do even the bare minimum due diligence.  Consider the sad story of fraudster Janamjot Singh Sodhi who ran a Ponzi scheme promising high rates of return in a relatively short period of time.

Sodhi solicited and received funds from investors starting in 2005 and through the fall of 2011 despite the fact that

  1. The New York Stock Exchange permanently debarred him in January 2006, and
  2. The California Department of Corporation ordered Sodhi to cease and desist from dispensing investment advice in California.

Potential investors and soon-to-be victims could have easily learned about these serious redflags had they bothered to simply google “Janamjot Singh Sodhi”.  Sodhi did not use an alias so the information and fraud was in plain sight.

“Forget about hiring an attorney or paying for a background check. If you just typed his name into Google you could find out that before he solicited you he was barred by the NYSE and threatened by the state of California. … People spend more time buying a used car for $2,000 than giving $10,000 or $1 million to someone they never met or checked out to invest.”  This from Bill Singer, a lawyer who specializes in investor fraud.

Sodhi was sentenced to four years and nine months in jail and required to pay back the $2.4 million he stole from investors.

Source: CNBC


Investors are Still Their Own Worst Enemy

  • May 12, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Mutual Funds

Our core belief is that the dominant factor in long-term, real-life financial outcomes is not investment performance, it is investor behavior.  Therefore, our true value as a trusted advisor lies in establishing and guiding our clients’ investor behavior, not in managing investment performance.

This philosophy of advice is data driven as many academic and industry studies demonstrate a perennial pattern that investors on average fail to capture the returns that their own investments offer, largely because of behavior.

In the recently released DALBAR study for the 30-year period ending December 30, 2016, the S&P 500 stock index produced an excellent annual return of 10.2%, while the average stock fund investor earned only 4.0%, a gap of 6.2%.  Bond investors did not fare any better. During the same 30-year period, the Barclays Bond Index yielded an annual return of 6.0%, while the average bond fund investor earned just 0.6%. Note these three decades include the crash of 1987, the tech boom-bust of 2000, the Great Recession crash of 2008, and the current bull market run — in other words a very fair sampling of good and bad times.

These results, illustrated above, reflect the fact that we experience powerful emotions when markets move up and down that cause us to make investment decisions that are not in our best interests (e.g., panic selling, euphoric buying, performance chasing, etc.).  This is a profound observation of the “behavior gap” that exists between investment and investor returns.  Investors are more often than not their own worst enemy when it comes to investing.

When we welcome new client families to our firm, we hand them a card.  The front consists of a bear market chart designed to prepare them for the fact that the market pulls back on average about every five years or so and not to panic.  The back of the card is a summary of What We Do / How We Earn our Fee:

  • 20% — Quantifying goals, crafting a long-term plan, funding the plan with a long-term portfolio
  • 80% — Coaching clients to continue working the plan through all the cycles of the economy, and all the fads and fears of the market
  • 0% — Analyzing/interpreting the economy and current events
  • 0% — Timing the market, calling tops and bottoms
  • 0% — Identify consistently top-performing investments

 

 


Guide to Car Buying and Leasing

  • May 4, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Personal Finance, Seeking Prudent Advice

Our friends at the The Big Picture have published an excellent guide to buying and leasing a car.

Here’s an overview of how to expertly navigate this process while saving time and money.

1) Set Up Your Online Shopping Identify:

Get a Google Voice account (its free) then get a LeeMail account (its free). These are the only numbers/addresses you use until you decide which car you are getting from which dealer.

2) Do your homework: Before you ever step foot on a dealer’s lot, you need to figure out a few things:

a) What kind of transport? Are you looking for a minivan, convertible, truck, coupe, SUV, etc.
b) The range of competitive vehicles for that car type
c) Your actual budget (including your “bottom line” monthly price)
d) Buy or Lease? (see #3)

3) Buy or lease? Most people should own, not lease cars. Its better not to pay for just the most expensive years of a depreciating asset.

The exception is if you can lease with pre-tax dollars — if you own (or are senior enough in) a company, than a lease may be a great deal. But without that tax advantage, the numbers favor owning.

4) Know Your Price Range and Approximate Cost of Cars: All of the cars I mentioned have extensive websites where you can build and price vehicles. You end up with MSRP.

5) Understand Factors Which Impact Pricing: The cost of any given car is a function of its retail price (MSRP), specific programs dealers are running, financing, what is hot or not, and other factors.

6) Be aware of the sales routine: If you followed steps 1-5, you know the approximate cost of the car, plus the options you want, and how that prices it.

7) Understand the buying/leasing math: The purchase math is simple: Negotiated cost of car plus financing expenses.

8) Use Online Salespersons: I asked several dealers for quotes on cars. If they ignored my request for an emailed quote and called, I held that against them. Different dealers have differing demands for specific cars. Some of the deals were very competitive .

9) Go to Competing Dealerships: Don’t be afraid to cast a wide net.

10) Use a car buying service:  That was the suggestion for people who are too busy or intimidated or who simply don’t want to be bothered. Leading suggestions: USAA, Credit Unions, and (multiple recommendations) CostCo.

Check out TBP’s full guide at here


5 Big Retirement Mistakes

  • April 27, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

#1 Not paying for financial guidance
People who have no problem paying for the services of an accountant or lawyer often balk at the prospect of cutting a check to pay for investment advice. Instead, they rely on “free” help from retirement advisers they meet at banks, brokerage firms and retirement seminars.

#2 Investing in something you don’t understand
If your financial adviser recommends an investment you can’t explain to someone else, just say no. It will likely carry steep fees (to pay steep commissions) and be less wonderful than it is touted to be.

#3 Supporting your adult children
You might be tempted to help them with a down payment or living expenses, but unless you are certain that you have enough to ensure your own survival, don’t do it.

#4 Low-balling elder-care costs
When planning for retirement, few people think about how much they might end up spending to support elderly parents. Inflation and longevity could erase the purchasing power of the children’s pension and savings, leaving them with too little to live on, let alone cover medical expenses.

#5 Underestimating how much you will need
It is easy to underestimate the impact of inflation and longevity, or the cost of health care, supporting family members or caring for a spouse with Alzheimer’s disease or cancer.

Source: Wall Street Journal


529 College Savings Plans — Your 30-Second Primer

  • April 20, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Financial Planning, Investing 101, Saving Money

529 plans are the best college savings option for most families.  Here’s a 30-second primer on how to choose the right one for your family:

  • 529s are funded with after-tax contributions; growth and distributions taken for higher-ed are tax free.
  • Essentially every state has its own 529 program.  You’re free to select whichever state’s plan you like.
  • If your state gives you a significant tax deduction on contributions (dark green in the map below), it’s worth reviewing your state’s 529 first.
  • If you don’t get a state tax deduction OR if it’s <5% OR your state offers tax parity (any color except dark green in the map below), go with the best plan available nationally.
  • Utah’s 529 is NorthStar’s favorite in the nation because of low fees, great investment choices, no contribution minimums, and very easy setup.

Need help making the best 529 choice for your kids’ future?
Give us a call at 704-350-5028 for a free consultation. 


“You need to judge us over a full cycle”

  • April 13, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Investing 101, Performance

The standard argument that active investment managers make when challenged by their clients on why their portfolios underperformed the market is, “you need to judge us over a full cycle.”

Robust results published in today’s Wall Street Journal blow a hole through active managers’ favorite defense.  Over the 15 years that ended in December 2016, 82% of all U.S. funds trailed their respective benchmarks.  That long time period is more than enough to encompass the active managers’ “full cycle”, boom-bust-boom argument.  The findings are noteworthy because it’s the first time 15-year results have become available for this very comprehensive analysis.

The results are even worse when you looks at popular assets classes:

  • 92.2% of U.S. large-cap active funds trailed their respective benchmarks
  • 93.2% of U.S. small-cap active funds trailed their respective benchmarks
  • 95.4% of U.S. mid-cap active funds trailed their respective benchmarks

That elusive 8% of all U.S. fund managers that did beat the market 2002-2016 is a slippery target for investors.  Most of them did not persistently outperform throughout those 15 years.  So you can’t just take today’s top performers and go with them.  Said another way, the likelihood of you finding one of these funds ahead of time is very, very small.

You have a key decision — a choice that will materially impact your future life.  How will you choose to invest the bulk of your portfolio?  Will you go with the 92% odds in your favor (passive management), or the 8% odds in your favor (active management)?

Source: WSJ – Indexes Beat Stock Pickers Even Over 15 Years


10 Most Common Behavior Biases of Investors

  • April 6, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Seeking Prudent Advice

Robert Seawright with Madison Avenue Securities assembled this list of the ten most common behavioral biases that hinder investors:

  1. Confirmation bias – we gather facts and see those facts in a way that supports our pre-conceived conclusions
  2. Optimism bias – our confidence in our judgement is usually greater than our objective accuracy
  3. Loss aversion – the pain of losing $100 is at least twice as impactful as the pleasure of gaining $100 (causes investors to hold onto their losing stocks too long)
  4. Self-serving bias – the good stuff that happens is my doing while the bad stuff is somebody else’s fault
  5. Planning fallacy – overrate our own capacities and exaggerate our abilities to shape the future
  6. Choice paralysis – we are readily paralyzed when there are too many choices
  7. Herding – we run in herds, latching onto the group think and moving in lock step
  8. We Prefer Stories to Analysis – people love a good narrative and prefer to be swept up by the story rather than work through the definitive numbers
  9. Recency bias – we tend to extrapolate recent events into the future indefinitely
  10. Bias blind-spot – the inability to recognize that we suffer from the aforementioned cognitive distortions!

Quick Check: Are Your Retirement Savings On Track?

  • March 30, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

The two greatest impacts on your retirement savings over time are starting early and saving consistently. Beyond that, how do you know if you’re on track to have enough set aside to retire comfortably? Fidelity Investments recently published convenient “rule of thumb” that provides convenient, age-based targets to help you gauge your progress.

What’s the end game look like?
If you’ve saved eight times your annual salary by your last year of work before retiring, you should have enough money to replace 85% of your annual income for a 25-year period, including social security.

Age-based targets for retirement savings. For example, at age 35 you should have saved one times your annual salary. By age 55 you should have 5 times your salary. Ultimately retire at age 67 with eight times your annual salary set aside in retirement savings.

Here are the key milestones for getting to 8x and beyond:

  • age 25: start saving for retirement beginning at 6% of annual salary and increasing this by 1% per year until it reaches 12%; employer provides a 3% matching contribution
  • ages 31-67: setting aside 12% of annual income for retirement savings with an additional 3% matching contribution from the employer
  • age 35: you should have saved one times your annual salary
  • age 45: you should have saved three times your annual salary
  • age 55: you should have saved five times your annual salary
  • age 67: retire with eight times your annual salary in retirement saves
  • age 67-92: live off your retirement savings

Recognize that this is a broad guide and each person’s requirements will vary by the specifics of their situation. Nonetheless, this provides a quick and easy reality check.

What if you check your actual retirement savings and you’re coming up short against these targets? Try to increase your retirement contributions to close the gap. Sit down with an investment advisor to review your investment portfolios and make sure they are optimized for success.

Age-based retirement savings targets for an individual making $100,000 per year.

Source:
Fidelity Outlines Age-Based Savings Guidelines to Help Workers Stay on Track for Retirement


Auto and Homeowners Insurance? Shop Regularly

  • March 23, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Personal Finance, Saving Money

home_auto_insurance

It’s important to shop most of your insurance policies on a regular basis. We recommend yearly for auto and every two years for homeowners.

Insurance rates vary by hundreds of dollars or even thousands per a year among insurers for the same levels of coverage. Get quotes from several companies on a regular basis to make sure you’re getting the best deal.

There are two ways to get competitive quotes: one-by-one via telephone or multiple quotes at a single go online. The latter is faster but don’t go there if you’re not comfortable getting spam in your inbox. If you’re a telephone kind of person, call three of the big providers like Allstate, Progressive, USAA, GEICO, and State Farm. If you prefer online, try insurancequotes.com or carinsurancequotes.com.

When you do your comparison shopping be sure its on an apple-to-apple basis — same level of coverage and save deductible. Also avoid asking for a new quote within 6 months of your last attempt. Insurers usually quote lower rates to “new” customers (i.e., those who haven’t asked for a quote in the last 6 months).

So, if you’ve never shopped your auto and homeowner’s insurance, or it’s been a while, don’t put it off any longer because you’re probably leaving money on the table.


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