Wednesday, December 19, 2012

“Investors have few spare tires left…”


“Think of an image of a car on a bumpy road to an uncertain destination that has already used up its spare tire. The cash reserves of people have been eaten up by the recent market volatility.”... Mohamed El Erian, CEO of PIMCO

We always hear the word volatility used in the media, by financial advisors and planners like me, but what does it really mean to you as an investor in dollars and cents? Sometimes a picture is worth a thousand words.

                       Low Volatility                                             High Volatility
                            Plan A                                                             Plan B
Year       Growth of $100,000    Annual Rtn.    Growth of $100,000     Annual Rtn.
1                    $110,000                             10.0%                     $134,000                       34.0%
2                    $115,500                               5.0%                     $121,940                        -9.0%
3                    $131,670                             14.0%                     $153,644                       26.0%
4                    $143,520                               9.0%                     $129,061                      -16.0%
5                    $162,178                             13.0%                     $169,070                       31.0%
6                    $165,421                               2.0%                     $167,380                        -1.0%
7                    $185,272                             12.0%                     $197,508                       18.0%
8                    $214,916                             16.0%                     $173,807                      -12.0%
9                    $227,811                               6.0%                     $210,306                       21.0%
10                  $257,426                             13.0%                     $227,313                         8.0%
                      Average Return                 10.0%                                                             10.0%
                      Compound Return              9.9%                                                               8.5%
                      Standard Deviation           4.5%                                                           18.6%           
  
Hypothetical portfolios for illustrative purposes only. Diversification does not assure a profit or protect against a loss.

This illustration looks at a low volatility vs. a high volatility portfolio.

The average rate of return is the same but the end result show that a lower standard deviation portfolio can compound at a higher rate of return and create more wealth over time. The longer the time period, the more pronounced the end result will be.

Most of the advertising done by investment companies show the average rate of return and may not explain the underlying volatility.

Here is another important point. A portfolio that goes down 50% requires 100% appreciation to get back to even.

In comparison, a portfolio that is down 8% only requires a recovery of about 9% to get back to even.

The greater the loss, the smaller the base on which your earnings can compound.

Yr     Growth of $100,000     Annual Return        Growth of $100,000     Annual Return
1                   $50,000                         -50.0%                                   $92,000                       -8.0%
2                   $54,500                           9.0%                                  $100,000                        9.0%

You can see from this example it would take years to get back to the original investment.

If you or your spouse is handling your own investments, make sure you both understand the risks you are taking on with your investment strategies.

If you don’t understand, or are unsure how to measure your portfolio’s risk, you may benefit from getting a second opinion or evaluation. The money spent with a professional could save you thousands of dollars in the future.

Knowledge is the power and you should understand the “whys” of how each investment made its way into your portfolio and the “how” of how this investment will help you meet your long term investment goals.

Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish and Associates.









Friday, November 30, 2012

To Risk or Not to Risk…


“October is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, March, June, August, December and February”….Mark Twain

All investments carry some type of risk. Today, I am going to focus on risk as it is measured by standard deviation (SD). Go on, keep reading. I hope I can make this an understandable concept!

Let’s use the example of choosing to invest between Product A and Product B. Product A has an expected rate of return of 4% with an SD of 2%. This means that about 2/3* of the time, this investment is expected to return between 2% and 6% (plus or minus 2%).

Product B has an expected return of 10%, but the expected SD is 20%. This means about 2/3 of the time Product B should return -10% to +30%.

In dollars, a $10,000 investment in Product A would be expected to grow in the range of $10,200 to $10,600 (again 2/3 of the time) over a one year time period. Product B’s return would result in a range from $9,000 (a $1000 loss) to $13,000. Product B has a greater reward potential but also greater loss potential than Product A. It is clear that Product B is “riskier.” Note: 1/3 of the time the gains and losses are even greater.

Another consideration to think about: if you had to liquidate your funds to raise money, you may have to sell your investment for less than your original investment. Understanding this concept is very useful in helping you determine what an appropriate investment would be.

The moral of this blog is to make sure you fully understand the risk you are taking before you make an investment. If you have the time and the temperament to take on risk, that is okay. The objective is to have all the facts in order to make the most informed decision.

In my next blog we will discuss the meaning of volatility.

*In statistics, the 68-95-99.7 rule — or three-sigma rule, or empirical rule — states that for a normal distribution, nearly all values lie within 3 standard deviations of the mean. About 68.27% (2/3) of the values lie within 1 standard deviation of the mean. Similarly, about 95.45% of the values lie within 2 standard deviations of the mean. Nearly all (99.73%) of the values lie within 3 standard deviations of the mean.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.

Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.



Thursday, November 15, 2012

Road Blocks to Creating Wealth


Do you have a substantial amount in savings, but lack confidence and knowledge when it comes to investing? This blogs for you!

As a Generation X , 90% of Gen X (those born between 1965 – 1982) are saving in their retirement plans at work, but only 15% said they knew they were on track to create the income they would need down the road, when they can’t or don’t want to work full time any more. If you are between 30 and 44, most of you have plenty of time to make a plan and create a way to monitor your progress. If you don’t have an end goal in mind, it is difficult to know if you are on track or not.

I often see young people come into my office that are saving appropriately, but their investment allocation is much too conservative to have their dollars working to help them grow their income account over time.

Have you heard of the “rule of 72”? It is basic financial concept that illustrates how many years it will take to double your money.¹ Let me give you a hypothetical example. Let’s say you are 30 years old, you have saved $50,000 and it’s earning 2%. By the time you are 66, the $50,000 would grow to $100,000 (72 divided by 2=36).

Let’s assume you invested in a diversified portfolio (small, medium, large companies around the world and some bonds in a hypothetical portfolio that we assume you average 7% rate of return. Now, according to the rule of 72, your money doubles about every 10 years. In dollars, you would have accumulated over $500,000 in the same 36 years. This of course is just a hypothetical example. My point is how you diversify your investment may have a huge impact on your future income. It could be the difference of $4,000 per year in retirement vs. $20,000 from the same starting point.

If this makes sense to you but you’re not sure how to apply it to your own personal situation, take the time to meet with an advisor or take a class on investing. Maybe start a group of other like minded friends and do an investment work club and ask an advisor to come in and facilitate to make sure you understand the why’s and how’s of what you’re doing in your 401k and other investments.

¹ 72 is divided by the interest percentage per period to obtain the approximate number of periods required to double the investment.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.

Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.



Wednesday, November 7, 2012

Create a Budget – Make a Plan


Are you trying to get your spending under control? Are you in the position that you realize that you need be saving more, but need the basic skills needed to put together a plan to map your future? If this resonates with you, read on…

Many women struggle with money management. First, get rid of any guilt you may feel about what’s happened in the past. You can’t change the past and it’s important to focus on what you can do right now, in the present. I am addressing this blog to a group of our population known as Gen X.

As a generation, the Gen-X’ers (those born between 1965 and 1982) have a propensity to spend more than they earn (40%), and not surprisingly, the majority (60%) don’t even have an emergency fund.

If you are in this or a similar situation, whether you are single or are in a committed relationship, take the time to sit down and really look at your spending patterns.

In order to save you have to pay yourself first, or make yourself one of the line items on your automatic bill pay. If you wait until the end of the month to save what’s leftover, this will never happen.

Analyze what you spend on entertainment, clothes and other discretionary “stuff”. You may be very surprised at how much money is wasted that could help you start a new financial future.

If you are in debt, make a vow to yourself to pay off the debt. Set up a goal and look at it every month. Write it down. I will pay off my debt in xx months. If you are single, find a friend or a trusted colleague to help keep you on track. Remember a goal with no end date is nothing more than a dream.

Don’t procrastinate another day. If you need help or encouragement, send me an email. When I was 34 years old, I was over $40,000 in debt, a single mom, and my income was less than what I owed. It can be done if you are committed to a better future for yourself and your family.

Today I am a successful business owner and have met my goal of being one of our firms tops clients.

If you’ve achieved the enviable goal of being debt free and have accumulated a comfortable savings account, we will address the next steps in my next blog.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.

Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Wednesday, September 19, 2012

“Some Day My Prince Will Come…or Not”




Young girls, teenagers, and college students are bombarded with images of getting married to the perfect guy, finding Mr. Right, and being taken care of by a man from an early age.

There are plenty of great female role models out there, but I am amazed at how many capable, intelligent young adult women do not start planning for their own future because they are waiting for Mr. Right to come along and take care of them!

Don’t get me wrong, women have come a long way. But I see many young women that put off dealing with their financial issues because they are waiting for a man who makes enough to take care of all their future needs. The reality is, Prince Charming may never come, or may not be the breadwinner you are looking for. This lack of self awareness often drives women to under earn, over spend, and push off taking control of their finances into the future.

There is nothing wrong with the desire to meet prince charming, but don’t ignore or postpone taking control of your life in the hopes that someone else will come along and solve your problems.

If you are in a low paying job, don’t waste your time and energy looking for a high earning man. Evaluate what you want out of life and figure out what you need to do to earn more money.

If you need inspiration, go out and buy the book “The Secrets of 6 Figure Women” by Barbara Stanny. It is an informative and empowering book.

Our earnings limitations are usually a result of our belief systems. If you have the desire to be more than you are today, earn more than you earn today, you may start feeling guilty or uncomfortable, thinking that somehow you don’t deserve it. The negative thought processes of using vocabulary that include, “I can’t”, “I won’t” or “I don’t,” can become self fulfilling prophecies. As Buddha observed, “All things that we are, arise from our thoughts.

Twenty three years ago when I entered the financial services business, I was scared to death. It was a struggle to come out of my comfort zone and enter into unknown territory. I had to tell myself I had unlimited potential. I told myself I could take care of myself and my daughter financially and would help others do the same. Did I believe this at first? No, but I wrote down positive affirmations, I wrote what my future would look like. I would recite positive affirmations in the shower. I knew being financially secure and independent was possible. I just had to squelch the voice in my head that tried to defeat me.

In my case, the pain of divorce forced me into action and I knew I had to go outside my comfort zone to change my life. The pain of a financial challenge is often the catalyst for taking action.

If you are facing a challenge, write down what your future will look like with you in charge!

Make a poster board (or use Pinterest) to post pictures of the positive things you will have in your future and a loving partner can be one of those. Look at it every day.

Take ownership and control and believe that you, and only you, can make the necessary changes to have a brighter future in which you are in control. Find a successful woman to mentor you so that you can affirm that what you want out of life is within your reach.

The beauty of this life is that all things are truly possible as long as you believe and are willing to work. In the words of my father, “the harder you work, the luckier you will be.”

I invite you to share your story with me on how you changed your life or how you plan to in the future.

Take charge!!



Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates



Tuesday, September 11, 2012

Lump Sum Pension – Is it right for me?

 

For the small percentage of folks out there that are still offered a pension by your employer (≈20%), lump sum vs. lifetime income requires a full analysis and should be done thoughtfully and thoroughly.

It still amazes me that people will come into our office to have a plan done to see which option to choose, and they follow up with, “I’m retiring next week or at the end of the month.” This is hardly enough time to fully analyze a situation to determine the best way to go.

If you go to a financial person and they are willing to answer that question at the first meeting, don’t walk but run out the door and get another opinion.

Why? Because you only get to make this decision once, and if you make the wrong decision it could cost you hundreds of thousands of dollars over your lifetime. There are a number of considerations to be made before you can make an educated decision.

Here are a few of them:

1. How is your health (and spouse’s)?

2. What benefits will your spouse be eligible for in the future?

3. What are your income needs?

4. Do you have aging parents / a child that needs ongoing financial support?

5. Have you discussed long-term care and health insurance costs in retirement?

6. Do you have other investments that offer future inflation protection?

7. Does the pension offer a cost of living adjustment?

8. Can your spouse live comfortably off of the reduced pension amount at the first death?

9. Do you carry life insurance? How much is it for and how long will it last?

These are just a few of the questions we explore before making a recommendation on what is best for each situation.

For those cost conscience folks out there who don’t want to spend the money on a financial plan, think again. It could be the best investment you can make to secure your financial future.

If you have specific questions, feel free to email me at kathy@fishandassociates.com.



Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates

Friday, August 31, 2012

Don’t Sign on the Dotted Line of Your Spouse’s Plan


Signing off on your spouse’s pension options without fully understanding them could cost you thousands or even millions of dollars over your lifetime.

There are many pensions in trouble today due to underfunding of their liabilities; and it has become exceedingly more common to offer employees a lump sum option. The other option is a lifetime income benefit.

Let’s look at two scenarios. We will start with a lifetime income option. John and Ellen were married for 25 years when John was offered an early retirement. John worked in the pension department of a Fortune 500 company. When he told Ellen they were going to take the single life option because it offered the highest payout, she signed off on the decision without a thought. His reasoning was that they were in their 50s and needed more income now in case he decided not to go back to work. She assumed that because he dealt with this in his job he would “do the right thing.” Whether this was a malicious decision or he thought it didn’t matter, he was later diagnosed with a terminal illness and Ellen was faced with the reality of losing $50,000 per year in income at his death. It was too late to buy insurance because he was now uninsurable. What was the cost to Ellen’s future? Assuming an interest rate of 4.25% and a life expectancy of 25 years, she lost the equivalent of $760,000 by not reviewing all the options.

All pensions are required to offer some type of survivor benefits, and they will always be a reduced amount because it is covering two lives instead of one.

More importantly, it is an IRREVOCABLE decision.

That means, it can’t be changed. I have spoken with a friend who currently works in a pension department and he said it is not uncommon for this to happen even today, when non-employee spouses are required by law to sign off if they waive the survivor benefit. “I didn’t understand” or “he didn’t explain the consequences,” are not excuses and you will not win a lawsuit and have the decision changed.

The moral of this story – this is your financial future and though it may be “ours” today, death and divorce happen. Insist on getting a second option before making a potentially life altering decision.

In the next blog, I will discuss the lump sum option.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Wednesday, July 25, 2012

Should’ve, Could’ve, Would’ve



Finances are one of the leading causes of arguments among couples, trumping children and chores!

What is it about money that causes so much strife?

Whether it is savings (too much or too little), unexpected expenses, disagreements on needs versus wants, most problems can be traced back to a lack of communication.

People think others “should” respect their needs and desires, that they “could” be more understanding, and if they “would” just agree with you, misunderstandings could be avoided. In other words, we all want things our own way.

We often project our beliefs on our spouses without giving them the opportunity to present their opinion or view on a subject.

Let me use myself as an example. When I married my husband, my daughter was attending a private catholic school. (If you read my past blogs you are aware I was deeply in debt after my first marriage ended). My husband, Kelly, suggested we send my daughter to public school and put the tuition money toward helping me pay down my debt. We had a few arguments about this before we actually sat down and discussed why this was so important to me. I went to catholic schools my whole life….I attended an all-girls catholic high school and felt my education really helped to shape my character, my ethics, and helped to empower me as a woman. In other words, a private education was an important part of my core values. I wanted my daughter to have an experience that would be equally beneficial and I was willing to pay for that. I had considered the cost of education as part of my plan to pay off my debt, which I successfully accomplished ahead of schedule. My husband attended public schools and received an equally good education. Once he realized why attending a private school was so important to me and he accepted it, there were no more arguments. He may not have understood or agreed with me 100%, but he was willing to accept it.

It is unfair to expect your spouse to agree with all of your needs or want because you think he or she “should.”

A marriage is a partnership that requires compromise and sometimes sacrifice. Good open communication can help you to understand each other and decrease the arguments around all things financial.

The next time you are having a disagreement about a financial matter and you think, “I wish he or she would, could, or should do something” just because it is what you want, take the opportunity to pause and ask yourself why you feel this way? Consider discussing the pros and cons of whatever it is you are arguing about and take the time to understand your partner’s viewpoint first.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Friday, July 20, 2012

Does Financial Stress Make Men Fat?


This headline from one of my financial planning journals caught my eye this morning. According to a study conducted by AVIVA USA (an insurance company) and the Mayo Clinic, the results suggest “stress caused by finances might cause men to gain too much weight”.

Other findings included that 2/3 of the men in the study reported they were very stressed and the biggest contributor to their stress was personal finances. Weight gain from stress is one the many side effects of stress in our society.

Even though a high percentage of men admitted finances were the main cause, half of these men said they do not discuss their finances with others (including a spouse), and only 1 in 5 of these men work with a financial advisor.

If you are a woman who is married and thinks that your husband is “taking care of business” it might be a good time to take the lead and initiate a conversation with your spouse or significant other. Many men feel it is their duty or obligation to be responsible for the finances of the household, including investments, even if they don’t have a clue what they are doing. This may prove to be detrimental to his health and your financial future. And your spouse is unlikely to admit this to you voluntarily. Men place a lot of value on being perceived as intelligent and many men think that they “should” know how to invest successfully to prepare for the family’s future.

My challenge to you is to find a financial planner that you are comfortable talking to and then to approach your spouse about getting a second opinion, to determine if you are on track as a family.

I suggest you first schedule a time with your spouse to have a conversation about your finances. Dig deep. Ask how he feels about his investment strategy, about his job about the amount of money that you may owe. Admit to your spouse if you don’t understand investments and share any feelings of stress that you have around money. Let him know it is not his sole responsibility to know everything about money , or to shoulder the burden of your family finances. Talk about his expertise in his chosen field and point out that the average person couldn’t perform his job with any level of expertise, and you don’t expect him to have full knowledge of tax, law, investments, insurance and other complex financial topics.

You can introduce the concept of going to a financial advisor to see what areas might possibly be improved upon. A second set of eyes can help to uncover potential blind spots.

By helping your spouse to realize that you don’t expect him to know everything about finances, you open the possibility of taking a real source of stress out of his life and improve his health in the process.

The survey findings show “ there is a need for men to increase their overall health as it relates to stress, weight and their financial preparedness” I encourage you to find a financial planner that you are comfortable talking to and set up an appointment to get a second opinion. By taking the initiative yourself to interview a few advisors, you become an integral part of the process and solution. Your spouse may appreciate this more than you’ll ever know! Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog.

 Please feel free to email me your questions and/or comments to kathy@fishandassociates.com.
Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Monday, July 9, 2012

5 Warning Signals for Future Financial Woes

My last blog discussed why you should have open and honest discussions about money and how it will be handled before you enter into a new life together.  Here are my top 5 red flags for potential future financial trouble. Read carefully and discuss with your partner.
1.      You discover your fiancĂ©’s credit card debt is more than 10% of his income.  If you ask your fiancĂ© how much he/she pays monthly and the answer is “the minimum," watch out.  You could be paying off debt for the next 10 to 20 years of your marriage.
2.      Your fiancĂ© uses the cash advance feature on his credit cards. There is never a good reason to do this.  You pay higher interest starting from day one, whether you pay your bill each month or not.  This demonstrates impulsive behavior.
3.      Your fiancĂ© puts everything on a credit card and does not pay off the balance each month. He uses the excuse that he will pay it off when his bonus comes in.  In the meantime, he is paying 12% to 24% interest.  As the old saying goes, patience is a virtue.  The new couch can be ordered (or whatever the purchase may be) after the bonus is paid.  Impulse buying gets a lot of people into trouble.
4.      No savings account.  If your fiancĂ© has no savings account, no matter what their job is, that should be a red flag.  It indicates they spend all (or likely more) than they earn.  That habit is difficult to break and can cause major problems in the future, especially if you are a saver.
5.      Refusal to make a budget – this goes back to #4.  My number one rule is pay yourself first.  My number 2 rule is don’t spend more than you earn.  Some people stick their heads in the sand because they don’t want to know how deeply in debt they are!
If you have observed any of the behaviors listed below, be aware.  These can be red flag indications for future financial woes!

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.
Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Tuesday, June 26, 2012

Know Your Fiance's Financials

I was reading an article in a financial planning journal, titled “Couples Choose Love, Despite Financial Woes."   In the article, 32% of people surveyed by TD Ameritrade said they would call off the wedding if their partner declared bankruptcy, while 27% said they would hesitate or postpone the wedding, and 41% said they would do neither.  In other words, they would go ahead and get married.  Ladies, if you fell into the 41% who would do nothing, please read on.
One of the first steps you should take before you move in with or decide to marry someone is to discuss and be open and honest about your financial situation.
If your partner is evasive, or not willing to share financial information, this should be considered a warning signal.  I’ve said this before in my blog, but it is worth repeating, “many people are more willing to discuss their sex life than discuss their current financial situation."  Please note, just because someone is in what you perceive as a high paying position, or earns a big salary, does NOT mean they are a good stewards of money.  You have to delve in deeper to understand your partner’s money personality.
In our court system, there is a process called voir dire, which means “to speak the truth."  Schedule a time to have an open discussion about both your current situations.  It is imperative you share any financial baggage you have and uncover any financial issues your partner may have.  This will allow you to have a full understanding of what you are getting into from a financial perspective.  Why, you may ask?  Once married, your spouse’s credit rating can have a negative impact on your credit rating.  You may not be able to quality for a home loan, a car loan, or a new credit card.  A person with a bad driving record can cause your insurance to be cancelled.  These are just a few of the consequences of being involved with a partner who does not manage their finances properly.   
How do I know this?  From personal experience.  When I was divorced 23 years ago, my husband had charged our credit cards to the max and was not paying the bills on time.  Once we were separated and ultimately divorced they became my responsibility, but the damage was already done!  I was embarrassed when I could not qualify for a car loan and when I could not refinance a 12% mortgage because of my tarnished credit history.
I managed to pay everything off, but not without irrevocable damage (temporary, but 7 years is a long time!).  This often happens post-marriage, as it did for me.  You can avoid further problems with your fiancĂ© or partner in advance by open honest discussions.  This is the only way to make an informed decision if your partner’s money history is less than squeaky clean.
It is better to know and work through this on the front end then to regret it and suffer from the consequences.  This is serious business and it is your financial future.  Don’t take it lightly!
Check back for next week to read about the red flags to be aware of.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.
Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Tuesday, June 12, 2012

No Investment is Risk Free

I’m often asked for the secret formula to successful investing. I think Peter Lynch said it best when posted the question: “How do I make money in the stock market?”  His answer was, “The key to making money in stocks is not to get scared out of them.”  In addition to not being scared out of the market, you can be rewarded for buying more shares when other investors are selling. Another key to investing is understanding all the different types of investment risks.  Even guaranteed investments like CDs that are FDIC insured carry risk.  CDs are subject to inflation risk.  If you earn 1%, inflation is 2% and you are in the 30% tax bracket.  Your CDs have a negative 1.3% rate of return.  That’s what we call in the investment business “going broke safely.”  The moral of this story is that if you are looking for an investment without any risk, stop looking.  You won’t find one.
All investments have risks – just different kinds and degrees.  So it’s important to know what the specific risks are and how they can affect your portfolio.**
Market Risk: Stock market ups and downs are unpredictable.  So market risk – the possibility that investments will lose value because of a decline in the securities markets – may be the risk you about first.  Choosing an appropriate investment strategy and sticking with it may help your portfolio survive a volatile market.
Interest Rate Risk: You may think you can avoid the uncertainty of the stock market by investing in bonds.  But bond investments have their own risks.  Changes in interest rates affect bond prices.  When rates rise, prices of existing bonds fall because older bonds are paying less interest than newly issued bonds.  Holding a variety of bonds having different maturity dates may reduce interest rate risk.
Default Risk: Bonds are subject to another type of risk – the risk that the bond issuer won’t have money to make principal and interest payments to bondholders.  Generally, investors who buy lower rated “junk” bonds are more at risk from default than investors who hold investment grade bonds.  Check an issuer’s credit rating with a bond-rating agency, such as Moody’s or Standard & Poor’s, to minimize default risk.
Inflation Risk: Over the years, the rising costs of goods and services can reduce the purchasing power of your savings.  If you invest the bulk of your money in fixed income investments, you may be at risk of not earning enough to reach your long-term goals.  Consider investing a portion of your money in investments, such as stocks, with the potential for earning higher returns to help reduce inflation risk.
Currency Risk: Adding international investments to your portfolio may provide diversification.* But be aware that currency exchange rates, foreign taxation issues, and differences in auditing and financial standards, among other things, can affect the value of foreign investments.
Play a role: You can’t prevent investment risk, but you can take steps to moderate it.  By diversifying your portfolio, you improve your chances that gains in one asset class may offset losses in another.  And, when you invest for the long term, you’ll have more time to recoup any losses.
*Diversification does not ensure a profit or protect against loss in a declining market.
**Content written by Newkirk, as distributed to Symmetry Partners, LLC.
Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.
Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Wednesday, May 30, 2012

Money Won’t Buy Happiness
I see people who are unhappy, even miserable because they spend most of their time comparing themselves to others.  It may be jealousy because their friend has a bigger house, makes more money, goes on better vacations, the list is endless.  Instead of being jealous, take a closer look at what is positive in your life.  Do you love your job and look forward to going in every day? If the answer is no, only you can make a change to turn that around.  Your husband or partner won’t, your kids can’t, your parents can’t.  Only you can.  When you find meaningful work, you tend to pay less attention to how much money other people have.  Remember wealth is not just about money. It is about good health, happiness, and a meaningful purpose in life. 
Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.
Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Thursday, February 23, 2012

From Bud to Blossom

And the day came when the risk to remain tight in a bud was more painful than the risk it took to blossom.”

I am going to switch gears for the next few blogs and shift my attention from the external resources that are available to help live a more mindful focused financially secure life to some of the internal factors.
Many women rely on someone else for their financial security, their happiness, and the direction they take with their life.  Women often stay in relationships that are destructive or abusive because they don’t feel empowered to take control and make the changes necessary to live a meaningful life outside of a relationship.  It can be painful to think about how to make your own way, to make financial decisions, go back to work, enroll in school to learn a new skill or be employable, but death occurs and divorce happens. We must learn to deal with what life gives us.
Women have the same choices offered in this life that a man does.  She may not perceive it that way. She may think that because of a choice that was made early in life to marry or start a family, or exit a career - that she is now a victim of her choices or that it is too late to change.
Let me share an inspiring story….
Mary found herself divorced at age 49. She had raised three children, been out of the work force for almost 30 years, had never completed college, and found herself “suddenly single”.  Mary received half of the financial assets from her 30 plus year marriage, but it was not enough to live off of for the rest of her life.
This was a critical crossroad for Mary.  Would she become a “victim” of her own circumstances and spend her time wallowing in self pity or looking for another man to take care of her? Or would she use this energy in a positive way to “blossom”.  Mary went back to school and received her degree. She found a job that paid her well, offered good benefits and rewarding work.  She ultimately left at age 65 with a 401(K) and a substantial amount of assets that she invested for her future from the divorce settlement. She is now in her seventies living a comfortable, joyful and fulfilling life. She is a great example of the power we all posses to bring about change to transform our lives.
Mary made some difficult choices. She made the choice to invest her settlement rather than spend it. She chose to persevere through college, to earn her degree, and to be persistent in looking for employment as a 50 plus year old college graduate.  Her friends pitied her “misfortune “and unexpected divorce at a time in life when most people are entering a more comfortable period, personally and financially. Mary is an inspiring example of the resilience we all possess.
If you know someone in this position, please share this blog.  If you are in this position yourself, I hope this story inspires you. Referring back to the opening quote, do what comes naturally to a plant.  Use the energy and take the risk to transform from a tightly closed bud to blossom into a beautiful flower.
Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.


Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Friday, February 17, 2012

Slow and Steady - Getting Started IRA 101

We discussed company sponsored retirement plans in my last blog.  If you are self employed or work for a company that doesn’t provide a retirement plan, don’t worry, you can set up an Individual Retirement Account (IRA) and receive some of the same tax savings.

If you are under the age of 50, and your employer doesn’t offer a plan, you can save up to $5,000 per year and deduct that payment from your income taxes.  What does that mean to you? If you are in the 25% tax bracket that could result in a tax savings of $1,250.  Your tax bill will be reduced by that amount.  If you are over 50 you can deduct up to $6,000 annually.  The deductibility of the contribution changes if your employer offers a plan. If your employer offers a plan,  please go back and read my last blog. Then go to your HR department and sign up as soon as you are eligible.

Another type of  IRA is called the Roth IRA.  Roth IRAs have been around since 1998. The contribution limits are the same, but a Roth does not allow a tax deduction.  Any growth on a regular or a Roth IRA is tax deferred.  Translation – no income taxes are due until you take money out.

The main difference between a Roth and a Regular IRA is at the time you are ready to take the money out after age 59 ½. The Roth proceeds are tax free (no taxes due) whereas the regular IRA distributions will be taxed in retirement. Roth’s can be both simple and extremely tax effective when compared with the many retirement accounts available.

Here are two great websites for details:  http://newirarules.com/
http://www.moneychimp.com/articles/rothira/rothintro.htm


Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.

Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Monday, January 30, 2012

Taking Responsibility for Your Future

The art is not in making money, but in keeping it ~ Proverb

In yoga philosophy, there is a concept called Samskara. Loosely defined, Samskaras are behavior patterns that are repeated over and over and create a “groove” that sets people’s thoughts and reactions on auto-pilot. These mental and emotional patterns are difficult to break. A pattern is repeated so many times that a person may truly believe that the way things are cannot be changed.

I have witnessed this behavior over the years. A woman is convinced she can’t move forward because of something she has internalized. Examples include: I can’t save, I don’t make enough money, my spouse spends too much - the list goes on and on. I’d like to show you how to turn a negative pattern into a positive one. I talked about social security in my last blog and today I am going to discuss the first step in taking an active role in saving for your future. Stop creating self imposed limitations and decide to take action now to prepare for your future.

Let me introduce you to a very common long term savings plan called a 401(k). If you work for a company that employs more than one or two people, there is a high probability you have a salary reduction plan sponsored by your employer, which could be a 401(k) plan. In simple terms a 401(K) is a tool to save money for your future. Money is taken from your paycheck before tax via payroll deduction by your employer and sent to an investment company. Both the salary reduction and the potential earnings on the money you save will avoid taxes until you are ready to use the money in your future for supplemental income. Currently you can start making withdrawals after you turn 59 ½ without penalty.

Let me use an example to illustrate the concept. Let’s assume you currently are in the 28% income tax bracket and you want to save $1,000. If you take that money from your paycheck you will have $720 after tax to invest.(280 is 28% of 1000 dollars).

In order to save $1,000 after tax you would have to earn almost $1,400 dollars ($1,400 less 28%, $392 equals $1008). By having your employer take the money pre-tax, the full $1,000 goes to work for you. It is equivalent to the IRS giving you a tax free loan of $280 to put towards your retirement. Many employers provide a “match” or what I like to call free money. How does that work?

The plan I offer my employees offers a 4% match if the employee saves 5% of their salary. On a salary of $35,000, an investment of $1,750 will receive a $1,400 match from me, the employer. That represents an 80% return on your money before it is even invested. If that is not enough incentive to run to your employer and sign up, then go back and re-read this blog entirely. Even without a match from your employer, it is still a great way to put money to work for you that otherwise would be paid to the IRS. The savings depend on what your income tax rate is.

Jack Canfield said, “If you don’t like your outcomes, change your responses!” You must take 100% responsibility for your own life. In order to do this you have to stop making excuses and justifying why you do not participate in a program that can have such a positive influence on your future.

No 401(K) available at your job? Don’t fret. My next blog will discuss what’s available for individuals to save for their future.



Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Thursday, January 12, 2012

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” – Ayn Rand

Ayn Rand’s comment is about the importance of being in control of your money and your finances, rather than your money being in control of your life. We make choices about our life every day. You probably don’t get in your car without a destination in mind. You know where you are going, and you know you may have choices on which route to take. For instance, the most direct route may take a little longer than utilizing a short cut. How does this translate to money?

I’ve written several times about the importance of planning. The next few blogs are going to address the different sources and strategies for long term savings to start building a secure investment strategy for your future.

Let’s start with one of the most overlooked sources, Social Security. If you have done nothing up to this point, the fact that you or your partner or spouse has a job means you have already started planning for your future. For every dollar you earn, your employer is obligated to contribute 6.2 cents into a fund for your future income. For 2011, your employer deducts 4.2 cents from your paycheck and sends it into the social security administration on your behalf (this is scheduled to go back to 6.2 cents after 2011).

You might be thinking, “What is this really worth to me and my spouse?” Saving pennies on the dollar may not seem like much money, but let’s look at how this translates into real dollars for your future.

Let’s say social security estimates that you are eligible for a $1,200 per month benefit in future dollars and you can start collecting this benefit at age 62. You would need a lump sum of over $225,000 today to create that amount of income (source: immediateannuties.com). If you did not work outside the home you are entitled to ½ of this amount as a spousal benefit, which has a value of another $112,000. (These are approximates and should only be considered as an illustration based on the current interest rate, for educational purposes only). So a deduction of 6.2 cents by you and your employer can equal $1,800 a month for life!

If you are currently working, or you just got out of college and are ready to start your first job, you have to start a plan for your financial future. IMPORTANT POINT: Social Security is intended to SUPPLEMENT your own personal savings and investments. It was not intended to be the ONLY source.

The average social security benefit in 2012 is a bit over $1,200 per month (source:http://seattletimes.nwsource.com/html/businesstechnology/2016875243_burns04.html).

In future blogs we will talk about what you can do to save for your future. We will look at short- cuts that can help you save more money, and we will explore what investment tools are available to help you reach your goals. In general, women are planners and successful investors. They are educated on the how- to’s and the whys. My goal is to help take you down the path of feeling confident enough to start the journey to your own personal destination. You can take the lead and be the driver whether you are married or divorced, single or widowed. Let’s get behind the wheel!

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.
Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.