Category Archives: Retirement

Investing, Market News, Options, Retirement, Stock Markets

Expert Daytrader Alerts: Master The Global Financial Markets

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Follow Trades from the Experts – Daytrader Strategy Alerts Beat the Market!

  • Tech Stocks
  • Dividend Stocks
  • Energy Stocks
  • Crypto / Gold & Silver
  • Options Trading 

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stock market - income machine

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Decades worth of experience in the financial markets has taught us some important lessons. First, and foremost, is the fact that the odds are stacked against you as an individual investor.

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Investing, Retirement, Stock Markets

Stock Markets: Understanding the Dow Jones Industrial Average

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One of the most important factors in gauging the stock market is Dow Jones Average; this index was established by a great publishing company that is still trusted by many investors.

Investors can measure the stock movements using this index and it is a trustworthy indicator of potential trends in both stocks and bonds. If you are interested to know more about it, this article is for you!

Introduction: A Brief History

The history of the Dow Jones Industrial Average all goes back to the end of the 1800s. A time the stock market was reaching the public interest. Considering that no TV or internet was available to the people back then, it should be easy to see that Charles Henry Dow and Edward D. Jones came up with a great idea in publishing stock news for the masses.

This financial news publisher was a daily magazine that published the news of 1 major stock back then. They created a chart of 12 houses of these 12 companies. As time went ahead, Dow Jones stock Averages added more and more companies in their charts; they indicate stock substitution, correlated changes and other factors based on divisor.

These Average signs facts are to show the Average prices of each stock on a daily basis. Dow Jones Industrial Average or DJIA is now based on 30 different stocks on an industrial basis. There are other stocks, they cover as well; Dow Jones transportation stocks, Utility Composite and several; bod Averages along with that. Here is a total list of Dow Jones Average magazine covers;

  • Dow Jones Industrial Average or DJIA- stock of 30 companies in total
  • Dow Jones Transportation Average or DJTA- stock of 20 transportation companies in total
  • Dow Jones Utility Average or DJUA- stocks of 15 Utility companies in total
  • Dow Jones Composite Average or DJIA- this Average considered the total composite of DJAI DJTA DJUA put together
  • Bond Shares

This magazine is the leading stock magazine for decades for an investor who we trying to measure their markets. Although other popular scales of the stock market in American Securities Market are: the S&P 500 Index and the Russel 2000 Index.

As one of the area’s most favored stock advisors, this publishing service has done great services for investing public. The most interesting aspect was that this magazine was a market analyst journalist rather than investors.

When this magazine started to publish, it was the blooming years of the stock market. Some even believe it was the effect of Dow Jones Average journal that led to much great marketing minds to jump-start their activity.

As the economy grew, many companies added to the stock market Average. However, from there, is only one local company that has been a part of Dow Jones’s Average magazine from the beginning; this magazine was named General Electric that has seen more than a century together with Dow Jones Average publisher.

Annual Dow Jones Average Trends

This magazine has always stood proud in the hallmarks of stock history. Although experts mark the 2008 financial crisis that was a widespread low time for many, it also affected Dow Jones’s Average publishing.

This hallmarks are concentrated on a market’s doomsday; 29th of September in the year 2008. Dow Jones Average loss was to a point that was recorded in the whole history of the stock market.

It was technically the third-ranking the history of stock loss registration. On the contrary, the golden year for stock ranking registration was the year 1915; a value increase of 81.66 increase.

Mutual funds in Dow Jones Average Publishing

If you are fascinated by the magnificence stock sharing company. you can invest it. The easiest way to get in the game with Dow Jones Average is to make an indirect investment; you can invest by buying index fund shares.

However, any of the index funds such as mutual funds and exchange-traded funds are replicable. That means they can replicate before fees and expenses; by holding similar stocks in the exact same proportions.

Downfalls and setback of Dow Jones Average magazine

Some expert believes that Dow Jones Average offers an inaccurate representation of overall market performance. According to Eric Edelman, one of the greatest and most accurate stock critics, S&P 500 and Russ3l 300 indexes are much more accurate when it comes to stock predictions.

Some other critics have pinpointed to price based criteria of their index; they claim that Dow Jones Average magazine gives a higher price to some stocks; these stocks are usually are given a higher influence to compare to their cheaper counterparts.

This is for their lack of comprehension of the stock’s price relativity to a particular company’s size and market capitalization. This way of calculation affects the price of the stock percentage. It results in showing a company’s stock market a lot weaker in the size is much smaller.

The same counter effect causes the large stocks to decide for Dow Jones Average magazine total index; that is the reason many smaller companies have been unhappy with the relevant results. For instance, being and UnitedHealth Group have the largest stock on Dow Jones Average’s Index.

The method of their calculation makes these two giant shareholders the most influential factor over the index data of this publishing.

Conclusion

Dow Jones Average magazine is one of the leading and oldest magazines in the stock market. While there are many who subject to this magazine’s function, others have been their loyal customers. As it goes for every system, there are advantages and disadvantages in any given system; and Dow Jones Average is not exempt from this fact.

Recently there has been a study conducted on the correlation facts in Dow Jones Average publishing data. This comparison has taken place between index movements. The result has revealed that these correlation compounds are higher at the time of the market including cycle; similarly, when there is a flat effect in the market, this correlation rises.

Dividend Stocks, Financial Stocks, Investing, Retirement

Financial Education: Stock Dividends vs. Stock Splits

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Every investor has one goal in mine when they are investing in a company – and that is to earn income. Cash dividends may be distributed during some periods due to a company’s success. There are times that companies do not allocate their wealth through cash.

But it is not a clear indication that the company is already failing. Declaring a stock dividend or a stock split are the two corporate strategies that can be used in dealing with different situations.   

What is a Stock Dividend?

Stock dividends are distributed by corporations to their shareholders as payment through additional shares. Shareholders receive stock dividends issued through an additional number of shares of the same kind held by them. The additional dividends come from up to 25 percent of the existing number of shares outstanding.

Therefore, the worth of the market value per share will remain unchanged. Instead of declaring cash dividends, corporations prefer issuing stock dividends as payment for plenty of reasons which will be discussed later on. 

To exemplify the outcome of a stock dividend, let’s presume that a motorcycle manufacturing company obtains 300,000 shares outstanding. The corporation earned $600,000 at the end of the year. If we are going to compute for its earnings per share, you are going to get $2 per share.

The market value per share outstanding is $60. As a result, the price per earnings ratio or the multiple that measures the relativity of the company’s annual net income earned to the market value per share is 30.

Instead of issuing cash dividends, the board of directors decided to distribute 10% stock dividends to give back to its shareholders. The corporation will have 30,000 additional shares (300,000 shares outstanding x 10%).

Thus, a shareholder that owns 30 shares will obtain 2 additional shares. This will affect the earnings per share which decrease to $1.82 and the price per earnings ratio rises to $32.97. Consequently, the shareholder that possesses 30 shares still owns an unaffected total value of $1,800.  

Stock Dividends are classified into two kinds:

  1. Small Stock Dividends: Stock dividends are deemed as small if it is below 20-25% of the total number of shares outstanding before the dividend declaration occurs. 
  2. Large Stock Dividends: Stock dividends are considered large if it is above 20-25% of the total number of shares outstanding before the dividend declaration occurs. 

What is a Stock Split?

A stock split occurs when more than 25% of the dividends are equally distributable to the shareholders.

Just like in stock dividends, dividends are transferred from retained earnings to the capital accounts and the shareholders will maintain the amount of their total market value. The commonly applied stock split is 2-for-1 and 3-for-1. It simply requires corporations to divide a share to 2 or 3 and it will still result in the same total dollar value.

For instance, a pharmaceutical company has 500,000 shares outstanding with $50 per share issued a 30% stock dividend.   The board of directors planned to divide its stocks by 2-for-1. Subsequent to the stock split, the market value per share will be $25 and will increase its number of shares by 500,000. Therefore, a shareholder that has 2,000 shares outstanding will acquire additional 2,000 shares and retains the total value of shares.

Comparison

Companies declare a stock dividend or a stock split to aim for long-term objectives. As a result, the investors will acquire a number of shares higher than the number of shares that they had before the distribution of stock dividends or the occurrence of the stock split. As a company proclaims a stock dividend or a stock split, its investors are anticipating better financial performance because it can now sell its shares for a lower price. 

Justifications for a Stock Dividend or a Stock Split

A company may declare a stock dividend due to its need to fuel its financial growth. These companies appropriated their cash and temporarily distributed stock dividends because they are planning to make new projects or intending to satisfy their debts. However, the declaration of stock dividends may also a sign that a company does not have enough cash. Therefore, it is incapable of issuing cash dividends.

A stock split occurs when companies believe that the market price per share is preventing the investors to capitalize on them. If the market price per share of a company is too high compared to the value of its competitors, potential investors may disregard the company.

Reverse Stock Split

If corporations have the capacity to split up the number of shares outstanding, they can also merge it to a smaller total number and appreciate the value per share.

However, the consolidation of total shares will not affect the total value of shares outstanding. This process is called as a reverse stock split or stock consolidation. If five or ten existing shares of a corporation are merged into one share, it will be named as a 1-for-5 or 1-for-10 reverse stock split. The opposite of this corporate procedure is the stock dividend.

To illustrate this, let’s assume that an e-commerce company obtains 300,000 shares outstanding which trades for $40 per share. The board of directors decided to combine 10 current shares into a new share or a 1-for-10 reverse stock split. As a result, the number of shares outstanding of the corporation will shrink to 30,000 but will raise its market value per share to $400. 

The management suggests the reverse stock split which needs the approval of the shareholders. Even though the corporate value is not affected, this corporate procedure allows companies to deduct the number of shares outstanding due to several reasons.

Companies increase their value per share because of the rules of mutual funds and institutional investors about the minimum price of a stock. A company that is unsuccessful to be qualified for the acquisition of an important investor may impair its good name. 

In addition, companies are merging their total shares to acquire a higher price per share for them to be listed on an exchange. A minimum trading price is one of the listing requirements that must be met by the companies in order for them not to be de-listed. 

 

Dividend Stocks, Investing, Retirement

Income Investing: Alternative Dividend Policies

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Income Investing: Alternative Dividend Policies

In order to survive, companies always find ways to construct plans that will help to maintain their present condition. As these companies make some progress, they continually feel the need to give back to their shareholders in order to preserve their trust while continuing their business operations and pursuing other projects in the future. 

A dividend is a percentage of a company’s retained earnings that are distributed to the shareholders in a form of cash, shares of stock, or property. Every time a company earns largely for a year, the shareholders are being paid back by the company through disbursing dividends as a reward for investing in them.

Most companies pay cash dividends to the shareholders. Even though, the dividends are not distributed periodically. The board of directors decides the right time to pay back to the shareholders and the portion of the retained earnings that shall be appropriated for the dividend distribution. Their dividend decisions are influenced by different factors to consider such as the company’s outstanding debts, liquidity position, inflation, legal restrictions, and earnings stability. 

Dividend policy is the financial strategy that the board employs to build its dividend payout to shareholders. The concerns that are included in the dividend policy are the payment timing and the amount which are based on the long-term capability to earn and on the unappropriated retained earnings. The understanding of shareholders from the dividend policy is essential from the fact that the dividends to be received by them will be coming from the unappropriated retained earnings. 

This article aims to enumerate the year-to-year patterns on how companies construct the structure of their dividend payout and explain the rationale behind these. 

Constant Dividend Payout Ratio

Under this policy, it is specified that a fraction of retained earnings is constantly taken for dividend distribution every year. In short, the constant dividend payout ratio preserves the percentage of retained earnings distributed as dividends to the shareholders annually. Despite the stability of the dividend per earnings ratio, short term earnings’ volatility still affects the dividends. The amount of dividends expectedly varies every year as profits fluctuate. In spite of this, most of the companies do not use this policy. 

Constant dividend payout policy appears to be adaptable to weakening market status as the dividend per share directly changes as the earnings fluctuate. The policy does not manifest any disapproving indication from the fact that the dividend payout ratio is not volatile. As a result, investors can be enticed by the companies that use this policy. 

In this policy, the fairly steady dollar dividend is sustained every period despite the earnings’ volatility.  A specific amount is given per year as dividends which depends on the management. The amount per dividend will not fluctuate unless the board is persuaded by data that an increase in dividend payment will guarantee the maintenance of its value in the future. The dividend per share will not decrease as long as the management can still anticipate the longstanding strength of a current dividend. 

A stable dividend policy indicates a constant normal operation of a company and steadies the market value of shares. In addition, a company’s liquidity position gets better. As a result, it can meet the standards of the investors that are looking for stable dividends. The continuous dividend distribution is advantageous for investors. It strengthens the relationship between the shareholders and the company because the dividends have become a regular source of income. This policy is beneficial for retirement as the stable dividend distribution can be financial support to suffice someone’s daily necessities. 

Even with the advantages of applying a stable dividend payout, companies also face risks that can cause severe damages which explains the refusal of companies on its usage. The companies that frequently pay out dividends without considering their financial standing seem undesirable for potential investors. It will also result in the disposal of shareholders of their stocks.

Small, Regular Dividend Plus Year-End Extra Dividend Payout

Applying this dividend policy will let companies distribute dividends periodically and reward shareholders with year-end additional dividend during their successful times. This policy is different from regular paying dividend policies because extra dividends are announced unexpectedly. Most companies pay out large amounts of cash as an extra dividend that is why the board meticulously assesses the company’s condition to avoid complications in the future.

After evaluating the company’s profits for that year, the extra dividends will be declared at the end of the fiscal year. The reason why companies impose this policy is to prevent the implication of long-lasting dividends. Issuing extra dividends also indicates a good management strategy. Another purpose of paying out extra dividends is to prove to shareholders how successful the company is and that it will maintain its financial health over a long period of time which might result in gaining the confidence and loyalty of the investors for the company.  

The small regular dividend plus year-end extra dividend payout is applicable for cyclical companies that are largely affected by economic fluctuation. The profits of these companies are volatile. Therefore, there are times that dividend distributions are postponed due to losses or capital expenditures from other periods that they are still currently working out. Utilizing this policy has a drawback as well. It is a mistake for the companies to pay out extra dividends to its shareholders while erroneously expecting that they can support their future projects. Investors may perceive it as a bad corporate decision made by the board. 

The company might miss the chance to capitalize on new projects or facilities because it already had paid out extra dividends to the shareholders taken from the company’s cash. On the other hand, companies may seem to be inactive in making new projects because they are distributing extra dividends plus small regular dividends. A company must obtain reinvestment opportunities as well from the fact that growth is also an important concern for investors. 

Some investors do not prefer investing from companies that are exploiting the small regular dividend plus year-end extra dividend payout because of its unpredictability. These companies may look as if they prosper just because of some special incidents and not because of their efforts to stabilize their financial condition.  Companies exert every effort to disburse dividends consistently over the long-term future. Nonetheless, some instances require them to prioritize other aspects. 

Dividend Stocks, Investing, Retirement

Stock Trading Strategy: Appropriation of Retained Earnings

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Stock Trading Strategy: Appropriation of Retained Earnings

After a successful performance of a corporation, the shareholders are expecting to receive something in return from their capital contribution. However, the board of directors will still discuss if it is the right time to distribute the retained earnings through dividends. Some corporations are still facing problems that hinder them to repay their shareholders. But some are just establishing their priorities in order to fuel their expansion. If the board decided not to pay out dividends or will distribute only a part of the profits, a portion of the retained earnings will be appropriated for a specific purpose. These are the commonly created appropriations:

Appropriation for Contingencies

Corporations allocate their retained earnings to reserve their resources if in case they fail on a pending lawsuit which will result in charges to be incurred. The amount of the liability to be charged on a company regarding a lawsuit is uncertain. A corporation that is unprepared for future losses might end up struggling with bigger problems. Therefore, it is a sensible decision for the board of directors to designate a portion of its retained earnings for emergency purposes. 

Appropriation for Plant Expansion

If a corporation has decided to acquire land and build plant facilities, it will surely allocate its retained earnings for such a project. As a project concerning plant expansion continues, a substantial amount of expenses will persist to be incurred to the company as time goes by. Thus, the designation of the retained earnings is reasonable since this is for the benefit of all the shareholders in the future. 

The appropriation for contingencies and plant expansion is called voluntary appropriations because these are established by the board of directors at the same time permitted by the shareholders.

Appropriation for Bonds and Stock Redemption

Retained earnings are often reserved with the intention of guaranteeing the disbursement for the bonds or redemption of the stocks. This retained earnings allocation is also known as contractual appropriation.

Appropriation Reserve for Treasury Shares

If a corporation is planning to reacquire outstanding shares from its shareholders, it will retain its profits instead of giving it out through dividends. Since it is covered by the law, the appropriation is also called as legal appropriations.

For readers to get the point of view of the corporation, an example is cited below:

Company XYZ has obtained retained earnings of $4 million. The board has appropriated an amount of $1.5 million from the retained earnings with the purpose of building plant facilities which the shareholders approved. The journal entry for the appropriation is recorded as follows:

Retained Earnings  1,500,000

   Appropriation for Plant Expansion 1,500,000

The appropriation for plant expansion is still a retained earnings account but it will not be taken for the payment of dividends. As a result, the unappropriated retained earnings worth $2.5 million is the maximum amount available for paying out dividends. 

Once the goal in appropriating the retained earnings has already been achieved, the appropriation can now return as unappropriated retained earnings. As a result, it can be used to distribute dividends or appropriate it again for some other purpose. A journal entry using the foregoing example will be prepared as:

Appropriation for Plant Expansion 1,500,000

    Retained Earnings  1,500,000

Aside from distributing dividends, corporations will not restrict a portion of their retained earnings for the intention of supporting their regular operations. The appropriations will be reflected in the statement of retained earnings in order to maintain the trust of the shareholders since some are skeptical that the appropriated amount might go to the pockets of the board of directors. 

 

Dividend Stocks, Investing, Retirement

Income Investing: The Dividend Distribution Process

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Income Investing: The Dividend Distribution Process

A thriving corporation never forgets to keep on looking back on its stakeholders who contributed to their successful performance. Once they secured their financial position and came upon a decision with respect to the dividend policy, corporations usually pay out dividends to their investors as their way of giving back. This process progresses gradually in order to give time for the deliberation of the Board of Directors and for the shareholders’ documentation. 

We are going to tackle the dividend payment procedures, the essential dividend dates that must be considered, and who is entitled to claim the dividend payments. To be included here are the accounting journal entries in order to present the corporate perspective to every dividend payment stage. This article will be beneficial especially for the investors that are just starting out. 

Date of Declaration

This is the date on which the dividend payment is formally confirmed and announced by the Board of Directors. The board has finally decided what type of dividend will be distributed, the dividend size, and the date of payment. This date is also known as the “announcement date”. This is a date of which option holders must let the corporation know if they want to use their right to the option. During this date, the liability to pay out dividends to the shareholders is acknowledged on the books using this journal entry:

Retained Earnings     xxx

     Dividend Payable     xxx

In this journal entry, we debited retained earnings since the dividend to be paid out will be taken from the profit appropriated by the corporation. Dividend payable has been credited because of the corporation’s liability from its shareholders. 

Date of Record

During the date of record, the corporation indicates the shareholders who will be eligible for the dividend payment. The stock and transfer books are to be closed on this date only to complete the shareholder list for the entitlement of the subsequent dividend payment. Therefore, a journal entry for this date is not necessary. In order to use as a source in indicating the eligibility of the shareholders for the dividend payment, a fixed date must be set since stocks are effortlessly transferable.

Ex-Dividend Date

This is a time on which the right of ownership to the dividends is homogeneously dismissed by the stock brokerage four days before the date of record. It is done in order to prevent the recording of the eligible shareholders last-minute prior to the date of record. Thus, stocks transferred subsequent to the ex-dividend date will be automatically listed out from the list of shareholders entitled to the dividend payment. There is also no required journal entry for this date. 

Date of Distribution

This is a date of which shareholders will receive the dividend payment. If a cash dividend is distributed, the corporation will mail the dividend check to every eligible shareholder. This date is also called as “Payment Date”. The journal entry to be recorded for the dividend payment will be:

Dividend Payable     xxx

   Cash, Property, or Share Capital  xxx

Since the liability has been satisfied, the dividend payable is debited. While cash, property, or share capital is credited due to the distribution of the dividends. 

In order to further elaborate the dividend payment process, an example is provided below:

The board of Bank of America Corp. has formally declared dividends worth $0.18 on a quarterly basis last October 22, 2019. It has been announced that the corporation has completed the list of shareholders eligible for dividends last December 6, 2019.  To finalize the qualified shareholder list on the date of record, the ex-dividend is set on December 5, 2019. At last, Bank of America Corp. will issue dividends to the qualified shareholders on December 27, 2019. The dates are illustrated below:

Date of Declaration: October 22, 2019

Date of Record: December 6, 2019

Ex-dividend Date: December 5, 2019

Date of Distribution: December 27, 2019

 

Retirement, Stock Markets

Retirement: Key Traits of Successful Financial Advisors

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Retirement Planning: Key Traits of Successful Financial Advisors

For many people, the active management of investment finances often becomes an overwhelming challenge.  Significant pitfalls can be encountered when mistakes are made, and this is the primary reason a financial advisor strives to provide the guidance that is needed to achieve long-term financial goals.  

The term financial advisor is generally used to describe someone that helps with investment management, taxes, retirement strategy, and general financial planning.  Of course, not all investment strategies are created equal, and there are many different types of financial professionals. Depending on the type of specialty that is needed, some financial professionals may not be sufficiently qualified to meet the requirements of every investment situation.

This is why it’s always a good idea conduct research beforehand so that it is possible to learn about what’s available and decide on the type of financial advisor that will be best-suited to deliver favorable results. Under ideal scenarios, investment advisors can help navigate the treacherous waters of economics and money management to offer support on the journey toward achieving financial freedom during the later stages of life.

What exactly is a financial advisor?

First and foremost, a financial advisor works as a coaching mentor to help explain when it’s best to make certain financial decisions.  Most are experienced in analyzing what’s happening in the financial markets and translating that information into actionable strategies which positively impact individual financial circumstances.  Some financial advisors will have more expertise in one area rather than another, so it’s critical to assess individual needs first and then pair those requirements with an advisor’s strengths and abilities.  

For example, one advisor may specialize in stock recommendations while others might create an entire financial plan that includes estate recommendations, tax strategies, and insurance planning.  This is why financial advisors are often separated into two different categories: investment advisors and financial planners.

We sat down with financial advisor coach Stan Mann to ask questions and learn about which strategies tend to work best for high net worth clients.  

What are three important traits seen in successful financial advisors?

Stan Mann: From a marketing standpoint, three characteristics of successful financial advisors are:

1. They understand that effective marketing is crucial for their success. A financial advisor who is a competent marketer will be much more successful than an excellent financial advisor who is not a good marketer.

2. Successful financial advisors implement their knowledge. They go out in the field and put it into action. Knowledge is not power. Knowledge is potential power.

3. They have a marketing plan that they follow step-by-step. It is based upon the fundamentals of marketing: strategies and tactics. They adopt specific strategies and implement tactics to achieve their goals.

For instance, a webinar strategy would include tactics like:

  • Writing a direct mail letter or email inviting prospects to a presentation
  • Making a website to maximize conversions
  • Creating a powerful presentation that employs powerful video marketing techniques
  • May decide to place an ad in their local paper

What challenges do financial advisors face in this year’s market environment?

Stan Mann: One big challenge financial advisors face in this year’s market environment is the flood of marketing messages. This makes it very difficult for an individual financial advisor to be heard. Therefore, a financial advisor needs to be unique and different from its competitors, so he stands out from the crowd. Another challenge is that people want to work with specialists, so advisors need to specialize in solving a particular problem for a specific group of people. They need to choose a niche.

What is one easy step financial advisors can take to attract more clients?

Stan Mann: Create a headline for your business that concisely tells who you help and how they benefit from your services. Some examples are: Helping families and business owners develop a sound financial strategy; Agent with New York Life offering personal and retirement protection; I help Ford Motor Company executives make the best use of the retirement options.

Is there anything else struggling financial advisors should know to achieve better success rates?

Stan Mann: Marketing alone will not sell big-ticket items that are provided by financial advisors. The goal of marketing is to get a sales interview. At that point, the advisor takes over and needs to convert the prospect and eventually enroll them in all their financial planning services, from investment management to estate planning.

Role of Financial planners

Financial planners tend to offer broader specialties, which can vary widely in scope.  Some financial planners are able to create personalized financial plans for clients that cover everything from investments to household budgeting and estate planning.  

As a result, these services are typically more comprehensive in nature. But they can also vary widely from one financial planner to another. Other financial planners may only be able to offer a limited number of services, so it is important to be clear availability before entering into contractual agreements.

One formal distinction many find preferable is the Certified Financial Planner (CFP) designation, which requires a bachelor’s degree (or higher) from an accredited college, extensive coursework confirmed through a board-registered educational program and successful completion of the CFP certification exam.  CFP certification status can also be verified through the Certified Financial Planner Board of Standards.

Role of Investment advisers

In contrast, an investment advisor tends to be more specialized in terms of the advice and services that are made available.  Investment advisors help clients to understand the true value of securities and construct strategies for developing an asset portfolio.  Investment advisors can be a firm or an individual person, and they typically analyze the value of stocks, bonds, mutual funds, and other market instruments.  

A good investment advisor can assess a client’s financial goals and give recommendations to buy, sell or hold certain assets depending on current market conditions.  Some individual investment advisors hold certification as a Chartered Financial Analyst (CFA), which is a highly regarded classification in the field of economics.

When is financial advice needed?

Over the course of a person’s lifetime, financial goals will often evolve and change in ways that can be unpredictable.  Events like a death in the family or major career change can negatively influence personal finances.

When big changes occur, it can be helpful to get an expert’s perspective and to get a second opinion before making any important financial decisions. Here are some examples of life situations which could benefit from expert advice from a finance professional:

1. Starting financial planning in early career

In the early years, it might feel as though the future is infinite and that there is no rush to begin financial planning.  But the reality is that it is never to early to start building a financial strategy for the road ahead, and a financial advisor might be able to help avoid many of the pitfalls and mistakes commonly encountered by newbies.  

Creating a personal budget, securing a mortgage, or preparing an investment portfolio can all be made easier with the help of a seasoned professional.

2. Getting married

Properly dealing with touchy money issues could turn out to make all the difference when developing the financial future with a new spouse.  New household unions can create a completely different set of financial challenges, and it is always a good idea to gain advice from people that have encountered those challenges themselves.

3. Entering middle age

Entering the period of middle-age can present its own set of challenges, and these are the years many people must pay college tuition for their children.  In addition to this, the period of middle-age is also when many people begin to look at new savings strategies for the retirement years.

4. Preparing for retirement

Reaching the pre-retirement years can be a transformational period in a person’s life.  Most people don’t know how much money will be needed in order to achieve security after a career is finished.  These are critical questions which can have dramatic ramifications if things are not planned correctly, and a financial adviser can help make preparations to achieve security in the years that follow.

5. Planning for later years

Once a person finishes a working career, it is time to start asking some critical questions.  Will it be possible to continue living comfortably on savings? Are potential health expenses adequately covered?  Will children, family, and loved ones be secure in the event of an untimely passing? Checking in with a financial can help with the answers to these questions and keep things on track for a secure future.  Retirement comes with its own unique set of “what-ifs” but proper financial planning can help to reduce the number of potential uncertainties.

The Bottom Line

No matter what stage of life a person has reached, a little support and guidance can always be valuable and there are many options available when it comes to selecting a financial advisor.   Financial experts are able to assess complex economic situations and devise strategies to benefit from the natural ebb and flow of the market.

Partnering with an investment expert can provide the guidance needed to avoid the stress and uncertainties that are often encountered in various stages in life, and the best financial advisors are able to offer hands-on support and individually tailored strategies to help achieve a strong financial future.  

For this article, we interviewed Stan Mann, Financial Advisor Coach and Founder of StanMann.com.

Retirement, Stock Markets

Financial Planning: Choosing Between Stocks or Bonds for Your Retirement Account

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Financial Planning: Choosing Between Stocks or Bonds for Your Retirement Account

“Behold the turtle. He makes progress only when he sticks his neck out.” — James Bryant Conant

If you are planning for retirement, you have probably felt the pressures involved when looking at all of the different places to park your money.  The financial landscape can be a complicated place, and the task of choosing between asset classes can seem daunting during the early stages of the process.  Two of the most popular asset classes are stocks and bonds, and many newer investors often wonder which is best for a long-term retirement portfolio.

In any retirement portfolio, investors must understand the concept of market risk as it relates to their positions.  This essentially refers to the possibility of losses relative to the potential for reward (gains) in the investment. These factors work hand-in-hand, but a seasoned financial advisor can help understand the nuances which are present when planning for retirement.  We sat down with Adam Anderson, CEO of MRA Capital Partners to identify new strategies to turn the odds into our favor on the path toward building wealth. Below, we can find some tips we uncovered along the way.

Measuring Potential Returns

As a general rule, greater potential for gain tends to be associated with larger levels of risk.  These factors can be understood when comparing the historical returns generated by investments in both stocks and bonds.  When a retirement portfolio is designed by an industry expert and assets are properly allocated, risk is generally a short-term phenomenon.  The potential for returns differs when we are comparing the advantages of stocks and bonds, and the appropriate selections for your retirement portfolio will depend heavily on your individual goals and needs.

Over the last century, U.S. Treasury Bills have acted as a proxy for money market accounts (generating yields of roughly 3.7% annually).  Longer-term government bonds returns about 5.7% over the same period. Put in simple terms, if you invested $1 in long-term bonds in 1926 your investment would be worth about $100 in 2008.  Stock investments, on the other hand, would have produced very different results (generating annual returns of 9.6% during these same periods). In this case, a $1 investment in large-cap stocks in 1926 would be worth about $2,000 just prior to the financial turmoil of 2008.

Stocks and Bonds

In the chart above, we can see the more recent trends in stock markets as they relate to the bond markets.  Interestingly, there are some cases where the traditional correlations to not match the current tendencies. These asset classes have had periods characterized by similar returns (both small and large).  This is precisely why retirement investors will consult an experienced financial advisor, so that it is easier to spot the differences in any given market climate. 

“As a CFP and Financial Planner, I’ve practiced the principles of asset allocation and diversification through both bull and bear market cycles as well as expansion, contraction, and recessionary economic climates.  Diversification between asset classes is paramount to a successful investment strategy,” Mr. Anderson explained. 

“At the most broad level, the mix between stocks and bonds is most commonly debated especially among retail investors and their advisors.  In my opinion, the most heavily overlooked asset class for individual investors are alternatives.  Alternatives can be commodities, futures, real estate, private equity, art and other non stock or bond investments. Alternatives should make up between 10%-20% of a well diversified portfolio for the average investor but is much higher for some institutional investors, endowments, pensions and high net worth individuals. While I don’t personally endorse this, some even choose to invest only in non market based alternatives ignoring stocks and bonds completely,” Mr. Anderson explained.   

“The benefit to alternatives is that when managed correctly, they should be non-correlated to stocks or bonds. Private equity and Real Estate tend to do a very good job at this. The challenge is finding the right managers and strategies that fit the investors goals and comfort level. Another challenge is investment minimums are generally very high and transparency is generally low when investing directly in real estate for example,” Mr. Anderson explained. 

MRA Capital Partners seeks to remove these barriers by offering limited partnership interests in a variety of single asset real estate investments as well as its Lighthouse Fund which is a diversified pool of high yield asset backed loans.  The individual accredited investor can access these private non-correlated investments for as little as $50,000 and has full transparency via our secure investor portal at www.mracapitalpartners.com.

Limiting Risk in Retirement Portfolios

More broadly, stock markets have generated much higher average returns, and this is why retirement portfolios tend to be more heavily-centered in these areas.  Of course, this added potential for return comes with added risk for the investment. But since the stock market tends to post positive results during the vast majority of market scenarios, any losses tend to be removed over time.

These are all risks which must be understood but when we have a well-constructed investment portfolio it becomes possible to turn the odds in our favor.  Markets will always experience -boom-and-bust type periods in the broader economic cycle. But when a retirement portfolio is well-constructed and diversified, these risks can be mitigated and substantially reduced.  Stock markets move higher during the vast majority of the time, and this is why buy-and-hold strategies tend to work best in generating returns and investment income.

“Heading into 2019, it’s no secret we are in the later stages of the current economic expansion and the federal reserve has made it very clear they plan to continue on their current path of raising rates.  This along with the uncertainty surrounding the current political and trade headline risk is likely to continue to cause volatility in the stock and bond markets,” Mr. Anderson explained. 

“If rates rise more rapidly than anticipated, bonds may prove to be less of a safe haven or diversifier than investors expected.  Additionally, as the world economy continues to become more integrated, many of the more liquid asset classes like stocks, bonds, REITS, and even liquid alternatives like those access via ETFS or Mutual Fund may prove to be more correlated to each other then they have been in the past. In my opinion, carefully selected privately held investments are the best way to gain non-correlated exposure,” Mr. Anderson explained. 

Understanding Time Horizons

Time is another important factor in any investment.  Will you be retiring 10 years from now? Twenty years?  Maybe much sooner? It is never too late to start planning your retirement portfolio.  But the time you have until you stop working your regular job can be an important factor in determining which types of assets to include in your investment portfolio.  If you have an extend time period before your retirement, there is often better opportunity for capital growth through stock investments. Conversely, if you are looking for short-term stability and income, bonds may offer advantages given your individual needs.

“There are risks associated with all investments.  At MRA Capital Partners, we focus on privately held investments back by the hard asset of real estate.  While these types of private equity and debt investments are not immune recessions, rising rates and other market forces, they very rarely behave like traditional stocks or bonds which may be a great complement to a balanced portfolio. Additionally, investments offered by MRA Capital Partners have a strong income component, many distributing 10% or more annually which make them a great complement or even alternative to bonds,” Mr. Anderson explained. 

Of course, these are all factors which should be discussed with your investment advisor, and the answers will differ depending on your individual needs and goals.  There is no substitute for individual attention and it must always be understood that “patience pays” in any financial markets investment.  As the sage wisdom of James Bryant Conant tells us “Behold the turtle. He makes progress only when he sticks his neck out.” This suggests a certain level of risk can be taken, as long as those risks are measured and characterized by patience that is well-researched in the current market environment.

For this article, we interviewed Adam Anderson, CFP®, CRPC® CEO – Managing Partner of MRA Capital Partners.