Monthly Archives: August 2016

You Could be Making the Biggest Mistake of Your Life

There are a few things in life you can do that you can’t undo.  You can’t turn back the clock.  Once you jump out of a plane at 15,000 feet, you’re committed to your parachute.  Retirement is another one of those things that is almost impossible to undo.  It’s literally a life-changing event.  So why do so many retire without a plan?

People retiring in their mid-60s will likely spend 20, 30, or more years as a retiree.  Before they make the plunge – “jump out of the plane” – they had better know that they have a parachute that works.

The Baby Boom generation is retiring at the rate of thousands a day and most haven’t planned adequately.  Over the coming decades there will be a lot of changes in their lives.  They will have to spend their time differently.  The cost of living will go up and they may face medical expenses as they grow older.  Their income may not match their expenses and they will need to figure out how to bridge the gap or where to cut back.

A good plan, prepared before you hand in your retirement notice, can take most of these issues into consideration.  If you don’t plan, you could be making the biggest mistake of your life.

Contact us.

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Does the Bull Market Have Room to Run?

From time to time we share the thoughts of prominent stock market analysts.  As the markets reach new heights, we scour the headlines and find prophets of gloom and doom just about everywhere.  We are by cautious by nature, but not given to hyperbole.

Here is the market as viewed by Brian Wesbury, Chief Economist at First Trust:

Now, the pessimists can’t stop talking about profits. Both S&P 500 reported earnings and the government’s economy-wide measure of corporate earnings are down 4.9% from a year ago.

In hindsight, corporate profits peaked in 2014, just like they did in 1978, 1988, 1997, and 2006. So, they say, a recession and bear market are on the way, just like the ones that followed those peaks in profits as well. It’s time to sell, again!

One problem with this theory is that it assumes the decline in profits is permanent. But profits have been hurt by the downdraft of energy prices, which crushed profits in that sector, while also hurting other related businesses. However, energy prices are rebounding while profits outside of energy are accelerating.

In addition, the ingredients for a recession are not yet there. Monetary policy is not tight, consumer and corporate balance sheets are healthy, and the recovery in home building has much further to go.

….

None of this means the stock market must go up today, or this week, or even in the year ahead. But it does bolster our case for a continuation of the bull market.

Quite an alternate view from many of the talking heads on CNBC.  If Wesbury is indeed right, the Bull Market has room to run.  In the meantime we’ll continue to invest with caution.  Like the Boy Scouts, we’re always prepared.  No one rings a bell when the market turns and we want to be positioned so that we will not be blindsided when it does.

If you are uncertain about what to do, contact us.  We’ll be glad to help.

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Getting Financial Help

When people have financial questions, what do they look for?  According to a recent survey most people are looking for someone with experience.  We want to take advice from people who are familiar with the issues we face and know what to do about them.  We all know people with experience, but financial problems, like medical problems, are personal.  Most people we know would rather not go into detail about their personal finances with family or friends.  They are more comfortable sitting down with a financial professional to discuss their finances, their debts, their financial concerns, and their financial goals in both the short and long term. Professionals will provide advice without being judgmental and are required by their code of ethics to keep your information confidential.

Once people find someone who has a track record of giving good, professional advice, they want personalized advice and “holistic” planning.

No two people have exactly the same problems.  A good financial advisor listens attentively to learn the goals, the concerns and personal history of the people who come to him for advice.

People have specific issues and questions.  For example: a couple, aged 39, is seeking advice about their path to retirement.  They give their financial advisor a laundry list of their assets, their investments, their savings rate, their debts, and the ages of their children and ask if they should be doing something different or are they on the right path.  That’s a very specific question and the advisor’s response is going to be personalized for them.

The plan that the advisor comes up with is going to involve much more than money.  It’s going to take their personal characteristics into account.  This includes personal experience with investing, their risk tolerance, and their closely held beliefs and ethical values.  This is what is referred to as “holistic” planning; taking personal characteristics into consideration.

There is a fairly big difference in the advice sought by

  • “Millennials” (those born after 1980 and the first generation to come of age in the current century),
  • “Generation X” (the children of the Baby Boomers) and the
  • “Baby Boomers” (children of the soldiers returning from World War 2)

“Millenials” say that among their top three concerns are saving for a large expense such as a car or a wedding.  Too many are saddled by debt acquired to pay for higher education and are finding that their degrees are not necessarily an entry into high paying professional jobs.  Their next largest concerns are saving for their kids’ education and putting money aside for retirement.

“Generation X” is primarily focused on saving for retirement.  They are married, own their own home and may have children in college.  Concerns two and three are tax reduction and paying for their children’s education.

“Baby Boomers” have finally reached retirement age.  More than a quarter million turn 65 each month.  As a group they are a large and wealthy generation, but a vast number have not saved enough for a comfortable retirement.  Many are forced to continue to work to supplement Social Security income.  Their number one concern is the cost of health care.  Concerns two and three are protecting their assets and having enough income for retirement.  The three concerns for Baby Boomers are inter-connected.  For many Boomers, Medicare helps them with the costs associated with most medical issues.  However, as people live longer, there comes a time when they are unable to care for themselves and live independently.  Long-term-care insurance was once believed to be the answer but insurance companies found that costs were much greater than anticipated.  The result is that many insurers have stopped offering the policies and those remaining have hiked premiums beyond the ability of many to pay.  The cost of long term care is so high that many Boomers are afraid that their savings will soon be exhausted if they are forced into assisted living facilities or nursing homes.

Each generation has its own problems and at a time when the world has gotten much more complicated.  Getting experienced, personalized and holistic financial advice is more important than ever.

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Taking Advantage of a Declining Stock Market Might Actually Help Your Retirement

savings questions

Saving for retirement is like a long journey.  On this journey, a declining stock market can work to your advantage if you take the opportunity.

A declining stock market is a chance to buy cheap; a time when stocks go “on sale.”  If the stock of a great company drops in price by half, you can buy twice the number of shares.  When it eventually recovers, you have twice the wealth.

“Dollar cost averaging” is an old technique that has been used by patient investors who put a fixed amount of money into their portfolios in good markets and bad.  It allows them to buy more shares when the market is cheap and fewer shares when the market’s expensive.

When workers put a fixed amount of money into their 401(k) plan this is exactly what they are doing.

Even people who are no longer adding money to their portfolios can take advantage of market fluctuations.  By rebalancing their portfolios regularly they buy more of what’s cheap and sell some of what’s expensive.

Taking advantage of these opportunities requires three things:

  1. Patience to view your goals from a long-term perspective.
  2. Keeping the emotions of greed and fear out of your investment decisions.
  3. Adding to your portfolio with regular contributions and strategic rebalancing.

Millions of people are using this approach to achieve their long-term savings strategy.  Using market declines to buy allows people to accumulate more money for retirement.  If you need help with patience, emotions, or investment strategies contact an RIA like Korving & Company.

Send for our free brochure: “Are You Ready for Retirement?”

 

 

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Is bigger really better?

Korving -1016 RET web

Everyone wants to see their business grow.  That’s true whether you own a small restaurant or an investment firm.  Some investors look at the size of the firm as an indication of the quality of the advice they will get, assuming that bigger is better.

But that is often the opposite of what they will experience.  Most people are aware that some of the best restaurants are small, with just a few tables, catering to a select clientele.  For the same reason, small investment firms are often better for their clients than large firms.

Large firms are the training ground for smaller firms.  Large firms recruit people who have no experience as investment managers and train them in selling their company’s products.  Once a financial advisor gains experience, he sees ways that his clients can be served better.  That’s the point at which he forms his own small firm where clients get the benefit of his knowledge and experience.

Clients who do business with small firms typically deal directly with the owners, who work for them, rather than employees who work for a paycheck.  As everyone knows, it makes a lot of difference when you’re dealing with the owner of a business rather than an employee.

Small firms are more flexible in meeting the needs of individuals.  Everyone is not the same.  Everyone has a different set of experiences, a different array of needs, and seeks a different level of service.  Large firms create policies and procedures that stack people in silos and try to impose uniform rules on everyone.  The larger the organization, the greater the need for uniformity and the less the business cares about any one individual.

If you have an investment portfolio worth a million dollars, an investment firm with assets-under-management (AUM) of $100 million will care about you and do its best to address your needs.  A firm with  AUM of $1 billion dollars will not care about you as an individual, you’re a statistic.

Korving & Company is growing Registered Investment Firm (RIA), but doing so in a way that makes sure that we always know our clients, care about them as individuals, and go out of our way to meet their individual needs.

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