Money

Why a dose of fear can be healthy for investors, bull market or no bull market

The year 2017 was a good year to be an investor. The Dow Jones Industrial Average just passed through the 24,000 level for the first time ever. The S&P 500, a broader measure of the market, finished higher in November, making it 13 months in a row of gains, also a record. Both indices are more than 20 percent higher than where they started the year. It seems that every day, the headline on CNBC reads “Markets Hit New Record High.” In fact, we are in a bull market that is now eight-and-a-half years old, the second longest in history. More from Investor Toolkit:Advisors turn to life coaches and counselorsRetirees leave $100B in Social Security benefits on tableRing in 2018 with a new financial game plan That’s good, right? As an investment manager, we think it’s g...

Ring in the new year with a financial game plan

It is now the time to start thinking about what you can do to get your financial affairs in order for the coming year. The turn of the year is typically a time of reflection and planning to right areas that you may have let go astray in the previous year. Implementing a financial plan is our top financial item you should resolve to address in the coming year. This vital item could have a tremendous impact on your financial future, not only for yourself in the coming year but also for generations to come. The coming year should be used to design, develop and implement a financial plan. Think about the amount of time that you spent last year in researching, booking and mapping out your vacation. Was more time spent on planning your vacation or your financial future? I would argue that, in mo...

Diversification: Don’t put all your eggs (or money) in one basket

Everyone is familiar with the saying, “Don’t put all your eggs in one basket.” Even in Shakespeare’s play, “The Merchant of Venice,” written more than 400 years ago, the character Antonio demonstrates his understanding of the concept when he says: “I thank my fortune for it — my ventures are not in one bottom trusted, nor to one place, nor is my whole estate upon the fortune of this present year.” Though savvy investors, like Shakespeare’s Antonio, have long understood the benefits of diversification, it was not until the 1950s when an academic named Harry Markowitz introduced research on what he called modern portfolio theory that people were able to understand diversification in an objective, mathematical sense. This research was so g...

The SEC busted an alleged $1.2 billion Ponzi scheme. Here’s how not to be victimized.

The Securities and Exchange Commission on Thursday announced charges against a group of unregistered funds and their owner, for allegedly fleecing retail investors through a $1.2 billion Ponzi scheme. The victims include more than 8,400 individuals, many of whom are elderly. In a Ponzi scheme, the perpetrator generally takes money from one set of investors to pay off others, often earlier investors or simply diverts the proceeds for private gain. Fraud complaints have increased by 60 percent in the last five years, according to the Federal Trade Commission. “The frightening truth about fraud is scammers scam and liars lie,” said Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority, or FINRA, which regulates brokerage firms. To ...

5 important year-end tax strategies you shouldn’t miss

The end of the year can be a hectic time. With the holiday season in full effect, we find ourselves cooking, shopping, and entertaining friends and family. But one thing many people forget about is taxes. While there is plenty of time after the holidays to prepare your taxes, some of the best tax strategies you should be considering must be implemented before the last day of the year. Here are five things you may want to consider before year-end to help reduce your tax liabilities now or in the future: 1. Set donations aside with a charitable remainder trust. There are great tax incentives for charitable donations. However, many people don’t take advantage of this tax benefit because they believe the money must be given away immediately. With a charitable remainder trust, you can mai...

Watch out for this red flag when paying your financial advisor

You may not be paying close enough attention to fee transparency while working with your financial advisor, and it could be costing you big time. “High fees, compounded over a long period of time, can be more than the performance of the actual investment that you have,” said Ron Carson, founder and CEO of the Carson Group. Mutual funds are an example of this, Carson said. You may see the management fee that you’re paying, but not the supplemental fees that can run as high as 1 percent to 1.5 percent. You can proactively address this situation in two ways, according to Carson. More from Investor Toolkit:Advisors turn to life coaches and counselorsRetirees leave $100B in Social Security benefits on tableHow much those advisor fees are costing you First, demand that your fin...

The right decision for investors to take when a market correction is due

It’s a question being discussed in the financial media quite a bit lately. With markets hitting record high after record high, when is the other shoe going to drop? Aren’t we due for a correction in the market? If so, is it time to get out? Yes, the market is due for a correction. That doesn’t necessarily mean a return to the crisis of 2008 and 2009. A correction is a negative reverse movement of an index of at least 10 percent. While sometimes used interchangeably, this technically differs from a bear market, which is a downturn of 20 percent or more over a two-month period or more. These events don’t always take place across asset classes at the same time. Sometimes, certain countries or parts of the world experience these events independently. Sometimes certain s...

Investors need to understand the ‘broker protocol’ for their own protection

It’s 4 p.m. on a Friday, and out of the blue you get a phone call from your brokerage firm — but it’s not the trusted advisor with whom you have worked for 20 years. Instead, it’s a new voice from a person you don’t know, who tells you that your former advisor has left the firm and your account has been reassigned to him. Of course, you ask where that trusted advisor has gone; does this person have his phone number? The guy on the other end of the call ducks the question and asks to meet you, to revisit your financial plan, to review your portfolio, and hints that he could do much better for you than your trusted advisor could. In fact, he offers to cut the fees you pay and to increase returns. Your trusted advisor may have been a family friend or a crucial part of ...

The biggest risk you face when choosing between a human and a robo-advisor

The choice you make for how you want to receive professional financial advice can make or break your portfolio. Investors today have four main choices for how they want to receive financial advice, Ron Carson, founder and CEO of the Carson Group, said in an interview with CNBC.com. You can either go the traditional route and work with a human financial advisor or opt to work exclusively with a robo-advisor. Or you can select a bionic offering, which is a combination of both, or choose to work with a financial advisor on a retainer-fee basis. More from Investor Toolkit:Advisors turn to life coaches and counselorsRetirees leave $100B in Social Security benefits on tableHow much those advisor fees are costing you The decision you make should be based on your personal goals, needs and objectiv...

If you can’t decide between active and passive investing, try the ‘core and explore’ approach

Most of the coverage of active and passive investing would have you believe that the world is firmly divided into two distinct and separate camps. But in reality, many investors like to have a combination of both. It’s not an all-or-nothing proposition. In fact, there’s even a portfolio strategy, “core and explore” or “core and satellite,” that incorporates elements of both styles. “Philosophically, investors [who employ core and satellite] are saying, ‘For the majority of my portfolio, I want to be well diversified and I want it to perform like the market, but I like the idea of taking some risk in an effort to outperform,'” said Michael Iachini, vice president and head of manager research at Charles Schwab Investment Advisory. The tra...

To hang on to boomers’ assets, financial advisors must court their kids

Much has been made of the massive generational wealth transfer, from aging baby boomers to their millennial and Gen Z children, that’s coming over the next several decades. But in some quarters this $30 trillion exchange is being met with a lot of hand wringing. As big as the transfer is, there’s an equally well-known statistic that usually accompanies any discussion of intergenerational wealth: Two-thirds of heirs fire their parents’ financial advisors shortly after they receive an inheritance, according to an InvestmentNews survey. Why? “Many of those inheriting children — they’re not children anymore — they already have established relationships with financial advisors on their own and they’re quite comfortable with those relationships,” said Ke...

Fueled by investor taste for liquid alternative investments, hedge fund conversions skyrocket

Fueled by an investor appetite for liquid alternative investment strategies, hedge fund conversions have been a growing trend over the last few years. With growing concerns about hedge fund returns and structure, interest in hedge fund conversions has spiked. These funds, typically offered in the form of a mutual fund, provide entree to a proven strategy and management team that most investors wouldn’t otherwise have access to. But, just how are these funds converted? And what are the benefits and risks of these products? Here, we offer an in-depth look at the hedge fund conversion processes: the upsides, the downsides and, of course, the tax implications. Hedge fund conversions are best compared to mergers. In the same way two companies might merge, shareholders, or limited partners...