Blog - Page 30 of 70 - NorthStar Capital Advisors

Companies Push to Boost 401(k) Savings

The most important driver of wealth creation is investor behavior, not investment performance. Taking their queues from research in behavior finance, big companies are helping steer investors to make good decisions and help secure their financial future.

New data reported by the Vanguard Group shows that

nearly 100% of the companies advised by Vanguard have default enrollment (i.e., employees are automatically enrolled in the retirement plan unless s/he opts out)
39% of plans automatically deduct 4% or more of employee’s pay for retirement contributions
~70% of plans automatically increase the employee’s contribution annually
~95% of plans automatically invest contributions in a target-date fund

These three actions — auto-enrollment, auto-increase, and target-date fund default investment — are considered best-in-class behaviors for employers and they’re becoming more prevalent.

Source: WSJ

No COLA in 2016

Not so great news for the 65 million retirees and others that receive Social Security benefits. For the first time in 5 years, there will be no annual raise in Social Security benefits. There’s no cost of living adjustment or COLA going into 2016 because falling gas prices have kept inflation low. According to the Social Security Administration’s calculations, inflation is down 0.6% for the past 12-month period that ended in September. This decline is largely driven by the 30% drop in gas prices.

Automatic benefits increases, also known as cost-of-living adjustments or COLAs, have been in effect since 1975. In the current process. the COLA is computed at the close of September and goes into effect with January’s benefit checks. Here’s complete list of COLAs received 1975-12016:

January 2016 — 0.0%
January 2015 — 1.7%
January 2014 — 1.5%
January 2013 — 1.7%
January 2012 — 3.6%
January 2011 — 0.0%
January 2010 — 0.0%
January 2009 — 5.8%
January 2008 — 2.3%
January 2007 — 3.3%
January 2006 — 4.1%
January 2005 — 2.7%
January 2004 — 2.1%
January 2003 — 1.4%
January 2002 — 2.6%
January 2001 — 3.5%
January 2000 — 2.5%
January 1999 — 1.3%
January 1998 — 2.1%
January 1997 — 2.9%
January 1996 — 2.6%
January 1995 — 2.8%
January 1994 — 2.6%
January 1993 — 3.0%
January 1992 — 3.7%
January 1991 — 5.4%
January 1990 — 4.7%
January 1989 — 4.0%
January 1988 — 4.2%
January 1987 — 1.3%
January 1986 — 3.1%
January 1985 — 3.5%
January 1984 — 3.5%
July 1982 — 7.4%
July 1981 — 11.2%
July 1980 — 14.3%
July 1979 — 9.9%
July 1978 — 6.5%
July 1977 — 5.9%
July 1976 — 6.4%
July 1975 — 8.0%

The Ultimate Alternative Investment Strategy?

The Onion:

“Taking into account the average American’s present level of savings as well as prevailing market conditions, there simply is no sounder choice individuals can make than venturing into a hidden glen or cavern, luring an enchanted creature from its dwelling, and then apprehending it and using its offered wishes to build a solid financial plan for the future,” said researcher Alison Knox, who explained that whether the wishes were acquired by sparing the life of a talking golden fish, rubbing an ancient Arabian lamp, or intoning the name of a woodland troll backwards to make him one’s captive, Americans would be wise to set aside one of their wishes for an ample 529 college savings plan for their children and use another wish on a well-funded retirement account.

Nation’s Financial Advisors Recommend Capturing Magical Creature That Grants Wishes (The Onion)

Home Price Growth Cools Off

The pace of year-over-year home price growth is beginning to cool off according to this week’s 20-city Case-Shiller Housing Price Index which updates through the end of July. At a national level, home prices have seen an annual price increase of 5% year over year as of July 2015. However, that is way off the peak year-over-year growth of nearly 15% seen in previous years. The following charts from Nick at Floating Path do a great job summarizing the trend. Click here to download Nick’s full report with high-resolution charts and great detailed information.

Here’s the whole index followed by a city breakdown showing the rate of growth.

and year-over-year growth by city:

Source:

Looking for a Lucrative Major?

The chart below illustrates how gender, major and earnings are related based on an analysis of college majors and median earnings after graduation for those under 28. Median yearly earnings are shown on the vertical axis: Majors that appear toward the top of the chart tend to earn more, and those toward the bottom earn less. The gender makeup of the major is on the horizontal axis, with majors that are male dominated on the left and female-dominated majors on the right.

The chart clearly shows that those who study male-dominated majors generally earn more after college than those who study majors that are dominated by women. Each of the squares below represents a college major; the bigger the square, the greater the number of recent graduates. The color of the square indicates the category of study — science, humanities, etc.

Source: WonkBlog

Our appearance in U.S. News & World Report

U.S. News and World Report quoted us in an article they ran on Monday (9/14) entitled“10 Reasons New Investors Should Enter the Market”. Lou Carlozo, one of the nation’s leading personal finance writers, reached out to NothStar Capital Advisors for ourinsights and wisdom for new investors contemplating an entry into a choppy or down market. Scroll down to read our full guidance.

Here are our leading thoughts to guide new investors:

New investors should embrace the opportunity to start their investing experience in a down market. These conditions are ideal for helping you get your investing psyche or your investing brain straightened out from the get go. Bear markets showcase the negative inputs and fears that all investors ultimate face. Take up the challenge early on to understand the fears, to recognize your intuitive human response, and take counter-intuitive actions. You’ll cultivate long-term wealth with that counter-intuitive mindset that features taking the long-view, developing a thick skin to combat the short-term “noise”, and sticking to your investment strategy with steely discipline.
If you’re new to investing you should be happy there’s a bear market because that means more buying opportunity. You’re buying on discount and getting more bang for the buck. So embrace the bear market. Get in the game and get the benefits.
Another reason one shouldn’t hesitate to get into a down market is because bear markets are absolutely normal events. Historically a bear market occurs about every 6 years on average. So a smart young person who starts investing in her mid 20’s will experience about 7 bear markets before retiring in her mid 60’s, plus 5 more during 30+ years of retirement. Even though bear markets are regular events, the exact timing of the bear’s appearance and disappearance is not. Hence, the evergreen but difficult-to-follow-advice, “don’t try to time the market”.
When you’re trying to understand what’s the best course of action, it’s often beneficial to consider what’s the worst thing to do. When it comes to bear markets, the worst thing to do is to panic, sell, and become a non-participant. Today in 2015, our office gets a regular flow of folks seeking our help. They cashed out at the bottom of the market in ’08 and ’09 and never got back in. They are trying to find the courage and commitment to come back in and re-start the wealth accumulation process. They have squandered the last 6+ years of stock market growth by sitting on the sidelines. They’ve thrown away money and damaged their retirement lifestyle by taking negative action around a bear market. So back to your quandary of plunging into a bear market…get in and stay in. You’ll be happier and wealthier in the end.
In summary, investors grow their wealth by getting in and staying in. If you have any troubles understanding the why’s or maintaining your discipline to stay the course regardless of the moment, reach out to a professional advisor. That will probably be the most profitable call you ever make in your life.

If you know someone who is new to investing and struggling to decide the best thing to do for her family, please share this information with her.

Jason Zweig’s Rules for Investing

Jason Zweig is a leading financial journalist and author. You’ll find his stuff in the Wall Street Journal several days a week. Buried within the appendix of his book, Your Money & Your Brain, is this great list of common sense rules that are commonly ignored.

Jason Zweig’s Rules for Investing

1. Take the Global View: Use a spreadsheet to track your total net worth — not day-to-day price fluctuations.

2. Hope for the best, but expect the worst: Brace for disaster via diversification and learning market history. Expect good investments to do poorly from time to time. Don’t allow temporary under-performance or disaster to cause you to panic.

3. Investigate, then invest: Study companies’ financial statement, mutual funds’ prospectus, and advisors’ background. Do your homework!

4. Never say always: Never put more than 10% of your net worth into any one investment.

5. Know what you don’t know: Don’t believe you know everything. Look across different time periods; ask what might make an investment go down.

6. The past is not prologue: Investors buy low sell high! They don’t buy something merely because it is trending higher.

7. Weigh what they say: Ask any forecaster for their complete track record of predictions. Before deploying a strategy, gather objective evidence of its performance.

8. If it sounds too good to be true, it probably is: High Return + Low Risk + Short Time = Fraud.

9. Costs are killers: Trading costs can equal 1%; Mutual fund fees are another 1-2%; If middlemen take 3-5% of your cash, its a huge drag on returns.

10. Eggs go splat: Never put all your eggs in one basket; diversify across U.S., Foreign stocks, bonds and cash. Never fill your 401(k) with employee company stock.

What You Shouldn’t Do Now

We sent the following note to clients and friends after stocks slumped world-wide this week, with U.S. and European markets off more than 5% and the Shanghai Composite Index losing more than 11%.

————

August 22, 2015

The natural inclination after the stock market falls sharply like it did this past week is to take action. Do something! But here’s the rub. You own stocks to achieve long-term goals. So unless your objectives have changed in the past few days, it’s probably not prudent to abandon your investment strategy based on a market gyration.

In today’s Wall Street Journal, Jason Zweig provides an excellent description of how NOT to react:

Don’t fixate on the news.
The more often you update yourself on the market’s fluctuations, the more volatile and risky it will appear to you even though short, sharp declines of 5% to 25% are common. The U.S. stock market has, in the past few years, been extraordinarily placid by historical standards. Even the sudden drops of the past few days are well within the long-term norm. Fixating on fluctuations in the short term will make it harder for you to remain focused on your long-term investing goals.

Don’t be complacent.
You should use the latest turbulence as a pretext to ask yourself honestly whether you are prepared to withstand a much worse decline. Did you make it through the epic bear market of 2007-09 without selling all your stocks? Are you extremely well diversified, with plenty of cash, some bonds, and with large and small stocks from markets around the world? Then you can probably weather a further decline. But if you sold in earlier bear markets or you are heavily concentrated in a few stocks or sectors, you should consider raising some cash or diversifying more broadly to protect against the risk that you will take even more drastic action at the worst time.

Don’t think you — or anyone else — knows what will happen next.
After a market drop, or at any other time, no one knows what the market will do next. The one thing you can be fairly sure of is that the louder and more forcefully a market pundit voices his certainty about what is going to happen next, the more likely it is that he will turn out to be wrong. Stocks could drop another 10% from here, or another 25% or 50%; they could stay flat; or they could go right back up again.

Diversification, patience and, above all, self-knowledge are your best weapons against this irreducible uncertainty.

If you want to read a different version of this evergreen advice, check out Ron Lieber’s article in today’s New York Times, Take Some Deep Breaths, and Don’t Do a Thing.

It’s normal to worry a little, but if your investments are positioned properly for long-term success, you shouldn’t lose sleep over blips in the market. I invite you to give me a call anytime at 704-350-5028 if you want to talk more about this.

Enjoy the rest of your weekend.

Chris

—
Chris Mullis, Ph.D.
CEO

Managing Your Portfolio: One Father’s Advice

Arthur Zeikel, president of Merrill Lynch Asset Management, sent his daughter a letter teaching her some investing basics.

Enjoy!

———

Personal portfolio management is not a competitive sport. It is, instead, an important individualized effort to achieve some predetermined financial goal by balancing one’s risk-tolerance level with the desire to enhance capital wealth. Good investment management practices are complex and time consuming, requiring discipline, patience, and consistency of application. Too many investors fail to follow some simple, time-tested tenets that improve the odds of achieving success and, at the same time, reduce the anxiety naturally associated with an uncertain undertaking.

I hope the following advice will help:

A fool and his money are soon parted. Investment capital becomes a perishable commodity if not handled properly. Be serious. Pay attention to your financial affairs. Take an active, intensive interest. If you don’t, why should anyone else?

There is no free lunch. Risk and return are interrelated. Set reasonable objectives using history as a guide. All returns relate to inflation. Better to be safe than sorry. Never up, never in. Most investors underestimate the stress of a high-risk portfolio on the way down.

Don’t put all your eggs in one basket. Diversify. Asset allocation determines the rate of return. Stocks beat bonds over time.

Never overreach for yield. Remember, leverage works both ways. More money has been lost searching for yield than at the point of a gun (Ray DeVoe).

Spend interest, never principal, If at all possible, take out less than comes in. Then a portfolio grows in value and lasts forever. The other way around, it can be diminished quite rapidly.

You cannot eat relative performance. Measure results on a total return, portfolio basis against your own objectives, not someone else’s.

Don’t be afraid to take a loss. Mistakes are part of the game. The cost price of a security is a matter of historical insignificance, of interest only to the IRS. Averaging down, which is different from dollar cost averaging, means the first decision was a mistake. It is a technique used to avoid admitting a mistake or to recover a loss against the odds. When in doubt, get out. The first loss is not only the best, but is also usually the smallest.

Watch out for fads. Hula hoops and bowling alleys (among others) didn’t last. There are no permanent shortages (or oversupplies). Every trend creates its own countervailing force. Expect the unexpected.

Act. Make decisions. No amount of information can remove all uncertainty. Have confidence in your moves. Better to be approximately right than precisely wrong.

Take the long view. Don’t panic under short-term transitory developments. Stick to your plan. Prevent emotion from overtaking reason. Market timing generally doesn’t work. Recognize the rhythm of events.

Remember the value of common sense. No system works all of the time. History is a guide, not a template.

This is all you really need to know.

When this article was originally published in 1995, Arthur Zeikel was president of Merrill Lynch Asset Management in New Jersey.

Source: Forbes

20 People You Don’t Want to Invest With

Identifying what does NOT work is often a great process for narrowing your list of options of what you should do. In that spirit, here’s Ben Carlson’s list of 20 people you wouldn’t want to invest with:

1. People that are unwilling or unable to admit their limitations.

2. People that are consumed by ideological or political beliefs when making investment decisions.

3. People that are unwilling to say “I don’t know.”

4. People that don’t learn from their mistakes.

5. People that blame external forces for their failures.

6. People that are unable to effectively communicate their process.

7. People that make guarantees about the markets in the future.

8. People that are more interested in selling you a product than creating a beneficial long-lasting client relationship.

9. People that try to invest in the markets as they “should be” instead of how they actually are.

10. People that are more worried about what others are doing instead of focusing on their own process and goals.

11. People that take the markets personally and let their emotions drive their decisions.

12. People that assume “trust me, I got this” is good enough in terms of explaining their strategy.

13. People that believe in conspiracy theories and think the system is out to get them.

14. People that are more worried about sounding intelligent than actually making money.

15. People that obsess over the market’s short-term movements.

16. People that would rather take you golfing than help you solve your problems.

17. People that make you feel like they’re doing you a favor by letting you invest your money with them.

18. People that try to dazzle you with 200 page pitch books.

19. People that are more worried about gathering future clients than taking care of their current ones.

20. People that tell you what you want to hear instead of what you need to hear.

Source: AWOCS

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