Posts
November 2012 | Vol. 1 No. 2 | Sports & Entertainment Wealth Management Division
Hiring the Right Advisors
Monthly Market Commentary
Monthly Market Barometer
Wealth by Numbers
Going Social
Poverty Trends in Retirement
The Best Investments for Your IRA
Why You Need a PFM App on
Your Mobile Devices
Dump Your Banks High Fees
Four Steps to Debt Reduction
Hiring the Right Advisors
With the football season winding down and the USATF
Annual Meeting about to begin, athletes are reviewing their options for
choosing the advisers that will guide them throughout their career. But for many athletes, there is confusion
about the duties of these advisers.
To help eliminate some of the confusion below are some
advisers with their duties.
A sports agent’s primary duty is to market the
athlete and negotiate contracts for their clients. Agents are responsible for
contacting team owners, managers, and coaches.
They are also responsible for making recommendations with regards to
their client’s career.
Next every athlete should have a financial advisor.
There are two basic types of financial advisors. A stockbroker or registered
representative recommends investments that are deemed “suitable” for the
client. They are compensated typically
on a commission basis and the products they sell.
A Registered Investment Advisor (RIA) is used to describe
an Investment Adviser who is registered with the Securities and Exchange
Commission or a state's securities agency. It is common for an RIA to actively manage
portfolios for clients. RIAs generally are paid on a percentage of the value of
the assets they manage for clients. As
an RIA they also adhere to higher standard then stockbrokers. An RIA has a “fiduciary” responsibility to
act and serve a client's best interests.
A Certified Public Accountant (CPA) is the highest
level of accountant and is someone who has passed the Uniform Certified Public
Accountant Examination. These individuals are responsible for filling their client’s
taxes and doing accounting and bookkeeping for their clients businesses.
Monthly
Market Commentary
Markets in October and early November were mostly distracted
from the positive economic news in the U.S. by poor earnings reports, election
jitters, and Hurricane Sandy. The earnings reports have not been pretty, with
negative news from slowing emerging markets, a weak Europe (and, to a lesser
degree, China), and large currency swings. Although the U.S. won’t remain
immune to the rest of the world forever, and our fiscal situation remains in
disarray, there still are a few factors that will help the domestic economy. These
include Boeing’s ongoing ramp-up, a nicely improved and stable auto industry,
increased oil production, a relatively stabilized banking industry, and a
lumbering housing industry that has finally begun to recover.
GDP: Third-quarter real GDP grew by 2%, ahead of the
second quarter’s 1.3% rate. Much of this improvement was due to a very strong
consumer, an improved housing market, and strong government spending.
Consumption, which represents about 70% of GDP, is always the most important
factor, because if consumers continue to spend, businesses will have to invest
in plant and equipment, inventory, and most importantly, employees.
Employment: In October, 171,000 jobs were added, sharply
exceeding expectations. While this was great news, Morningstar economists
believe that at the current pace of job growth, an additional 23 months is still
required to recover pre-recession jobs. Employment recovery across sectors has
not been consistent. The overall service sector is nearly back to pre-recession
levels, while good-producing sectors (mining, manufacturing, and construction)
have only recovered 15% of the jobs lost. Furthermore, massive efficiency gains
in manufacturing have moved industrial production levels to near pre-recession levels,
even as manufacturing has regained a measly 25% or less of the jobs lost. The
unemployment rate inched upward to 7.9%.
Housing: Despite the arrival of fall, which
typically brings a drop in real estate activities, home prices, new home sales,
and pending home sales all showed improvement. On a year-over-year basis, the
August Federal Housing Finance Agency (FHFA) Home Price Index was up 4.6%, with
all nine regions in the U.S. showing positive growth. While almost always moving
in the same direction, pending sales (contract executed but not closed) have
exceeded closed sales by a large margin for many months, as below-market appraisals
and mortgage denials caused many contracts to not close. Recently, the gap
between growth in pending and closing sales has narrowed to about 2% from as
much as 6%, which Morningstar economists believe points toward an improving
housing market.
Manufacturing: October’s manufacturing data showed
gains in new orders and an increase in employment, which suggested that the
manufacturing sector in the U.S. may have bottomed and is now recovering. Auto sales
in October were better than a year ago, but slumped from 14.9 million units in
September to 14.2 million units in October. Hurricane Sandy was most likely the
cause of this shortfall, as a large portion of auto sales occur on the last few
days of the month, and the area hit by the storm accounted for 20%-25% of all auto
sales. Outside of the U.S., China showed meaningful improvement between
September and October as the Chinese construction market continued to show
signs of bottoming. Europe’s manufacturing, on the other hand, continued to
contract and is currently at its lowest level in 40 months.
Election results: With President Barack Obama beating out Republican challenger Mitt Romney to win a second term in office,
all attention has now turned to global woes and the looming fiscal cliff. If
nothing is resolved by the end of 2012, massive spending cuts and
across-the-board tax increases may occur. Markets reacted negatively on
Wednesday November 7th, falling by as much as 2.73%, with energy and banking
sectors among the hardest hit.
Portfolio Notes
The U.S. stock market is now near
a three month low falling after President Obama’s election win. Wall Street has
concerns about the overall fiscal policy going forward and the impact it will have
on the economy. Additionally, investors are worried about the approaching fiscal
cliff and the EU debt crisis.
Our approach of focusing on attractively
valued companies looks positive over the long haul and has held up comparatively
well, thanks to a handful of strong performers.
Even with the current economic concerns
we remain positive and believe that the current sell off has left for some possible
attractive valuations.
Going forward we believe that a
positive but cautious approach is in order as we research possible new additions
to our clients investment portfolios.
Monthly Market Barometer
1 Month, ending October 31, 2012. The U.S. Market returned
-1.75% (YTD 14.09%).
The Morningstar Market Barometer provides a visualization
of the performance of various stock market indexes. The color scale (red for
losses and green for gains) allows you to assess which areas of the market
performed strongly and which areas showed weakness for the time period
analyzed. The nine square grid represents stocks classified by size (vertical axis)
and style (horizontal axis). There are three investment styles for each size
category: small, mid and large. Two of the three style categories are “value” and
“growth” while the central column represents the core style (neither value nor
growth characteristics dominate). Large-caps account for the top 70% of the capitalization;
mid-caps represent the next 20%; and small-caps represent the balance.
Wealth by
Numbers
America has long been known as the land of opportunity
and the promise of a better life to people from all over the world. Recently,
however, many Americans feel robbed of opportunities and better lives by the
top 1% of their own. This growing income inequality has led to problems and
civil unrest, as demonstrated by the “Occupy Wall Street” movement.
The table presents household income distribution
data from the U.S. Census Bureau. Given that the poverty threshold for a
two-member household is around $14,000, it appears that approximately 13.7% of Americans
are poor. At the other end of the income spectrum, 3.9% are rich, with
household incomes higher than $200,000.
Going Social
We are pleased to announce that we are on several social media
sites. So whether you like Facebook, Google+, Twitter, Blogs, Pinterest or
LinkedIn we have you covered. “Like” or follow us and each morning you will
receive breaking pre-market news, analyst rating changes and earning reports. Additionally,
we will post breaking financial news and article that you can’t get anywhere
else.
Greater financial knowledge is just a click away.
Retirement Plans for Athletes and Entertainers
Unlike NFL, NBA and the MLB
others such as professional track athletes and entertainers are considered self
employed. Because of this, these individuals
can establish their own plan to help lower their taxes and fund their
retirement. There are many different types of plans available, but time is
running out on some of them. For example
an individual 401k plan needs to be established and funded before December
31.Other plans include Sep-IRA’s, SIMPLE IRA’s, SARSEP, Roth IRA, Roth 401k’s, Profit
Sharing and Defined Benefit plans. We
can assist you with establishing the retirement plan that right for your unique
needs. Simply contact us at 248-804-0436
or 424-249-9290.
The Best Investments for Your IRA
Stocks or Bonds: Which Are Better? Conventional wisdom
holds that investors should hold bonds in tax protected vehicles like IRAs and
stocks in their taxable accounts. Intuitively, that makes sense. After all, bonds
throw off a lot of taxable income, which is taxed at rates as high as 35%.
Meanwhile, stocks typically generate much less income, and that dividend income
is taxed at a much lower rate—generally 15%. (Longterm capital gains from
stocks enjoy the same rate.)
In this instance, however, the conventional wisdom
has limitations. Stocks generally produce higher returns than bonds, and thanks
to the magic of compounding, the differences in performance really add up over
time. That's why the return from stocks can generate a much higher tax burden
than bonds over the long haul. If you're a long way from retirement, it might
make more sense to hold stocks in your IRA (and bonds if you are close to
retiring).
Not All Investments Are Equal
So you've got a while until you retire, and you've
decided that stocks are the right choice for your IRA. That decision only gets
you so far. For an IRA, not all stock investments are created equal. For
example, index funds' popularity has soared over the past decade. Such funds
may also have the benefit of very good tax efficiency, because managers of
large-cap index funds tend to buy and sell infrequently. In the same vein, our
actively-managed portfolios have very low turnover and often don't generate a
lot of taxable gains, either. Either fund type would work well as an IRA holding.
However, to the extent that you own funds that do generate a lot of taxable
capital gains, it makes sense to hold them in an IRA or other tax sheltered
account. In so doing, you take maximum advantage of the IRA's key attribute:
tax-deferred (traditional IRA) or tax-free (Roth IRA) compounding.
As for bonds, municipal bonds don't belong in an IRA;
such funds generate income that's exempt from federal and in some cases state
income tax, and their yields are generally lower than taxable bonds as a result.
Meanwhile, high-yield bonds are better contenders—they generate heaps of
income, but IRA investors don't have to pay tax on those distributions. Alternative
asset classes may also make ideal IRA candidates. REIT funds, for example, pay
out heaps of income from their underlying real-estate holdings, and none of it
is tax-advantaged; thus, to the extent that you own such an offering, you'll
want to be sure to stash it in an IRA or other tax-sheltered vehicle.
Keep the Big Picture in Mind
How you split your portfolio between stocks and bonds
should be based on your risk tolerance and time horizon, not what makes sense
from a tax perspective. Your goal isn't necessarily to avoid taxes, but to maximize
after-tax returns. Be sure to consult with us or a tax professional for the
latest rules and regulations.
*Past performance is no guarantee of future
results. Stocks and REITs are not guaranteed and have been more volatile than
bonds. REITs typically provide high dividends plus the potential for moderate,
longterm capital appreciation. A REIT must distribute at least 90% of its
taxable income to shareholders annually. Real estate investment options are
subject to certain risks, such as risks associated with general and local
economic conditions, interest rate fluctuation, credit risks, liquidity risks
and corporate structure. High-yield corporate bonds exhibit significantly more risk
of default than investment grade corporate bonds. Municipal bonds may be
subject to the alternative minimum tax (AMT) and state and local taxes, and federal
taxes would apply to any capital gains distributions.
Things to
Remember:
Not All Investments Are Equal
Keep the Big Picture in Mind
Municipal bonds and Annuities don't belong in an
IRA
Why You
Need a PFM App on Your Mobile Devices.
As a financial professional, I constantly speak
with clients about the importance of saving for retirement, investing regularly
and saving. Most clients are open and more than willing to listen to this
advice. But when I advise them to set a
budget they typically react like I just asked them to jump off a building. The excuses start flying – “I’ve done it
before and it’s too hard,” “It takes to much time,” I don’t know how to even
begin.” Now with the use of PFM Apps all
those excuses are eliminated.
PFM stands for Personal Financial Management. Now
with the use of these Apps, many which are free, tracking where your money is
going has never been easier.
Here is how they work. Once you have downloaded the
App from Google Play or the Apple App Store you link all your financial
accounts to it – bank accounts, credit cards, retirement accounts, brokerage accounts,
mortgage, auto payments; any financial account can be linked to the site so you
have all your information aggregated in one place. Then the App updates the
information from all your various financial firms and gives you real time data
from your accounts.
Here are a few features and benefits that these
Apps have that make them worthwhile.
Track your Spending – These Apps will
automatically keep track of all transactions in your accounts as they happen. Each transaction is then automatically grouped
into categories such as dining, utilities, and transportation.
Budgeting – Budgets are automatically created
based on your past spending habits. From
there you can customize your budget to meet your needs. Some programs even allow you to compare your
budget against national averages within your demographic.
Financial Picture – Because all your accounts are linked
you can at any time see your assets and liabilities along with your net
worth. You can even track these over
time to make sure you reach goals you have set.
Want to see how your investment portfolios performed today; it’s just a
click away.
Reminders – Have you ever bounced a check, forgotten
to pay a bill, or over spent. These programs
will send you email and text alerts notifying you before it happens allowing
you to make adjustments and save on banking fees.
Goal Tracking – Are you saving for something? Are you
looking to pay off your mortgage? You can use these Apps to track your
goals. By doing this you are much more
likely to reach that goal.
There are no more excuses, having an up to date picture
of all your finances has never been easier.
The most popular Apps are – Mint.com, PageOnce, Adaptu, HellowWallet and
Yodlee and I have recommended these to my clients.
Dump Your Banks High Fees
Manage, move, and use your money easily - and without any extra
fees
RL Paler Investment Advisors, LLC clients can now more simply and
conveniently manage their cash — without incurring access fees — thanks to TD
Ameritrade’s Online Cash Services.
Have the freedom to access, spend, and manage your money the way
you want - with a debit card with free ATM withdrawals, free check writing and
free online bill pay*. Your cash is more flexible with Online Cash Services
from TD Ameritrade.
Avoid Unnecessary Charges and Fees
*No monthly maintenance fees, no minimum balance requirements
*Unlimited check writing and free standard 100 reorders
*Free online bill pay
*Avoid ATM fees—you get reimbursed for any ATM charges nationwide
Get On With Your Day Fast and Free with Online Bill Pay Paying
bills and moving funds around is just a part of life. But that doesn't mean it
should be hard or take up your whole day. With Online Cash Services, you can
quickly and easily:
*Save time and postage costs with free online bill pay
*Set up free recurring bill payments—a real time-saver
*Easily move money between TD Ameritrade accounts
Nix the Dreaded ATM Fees
Why should you have to pay to use your own money? After you
receive your free TD Ameritrade® debit card, you’ll be reimbursed for any ATM
fees charged nationwide.
More Cash Features
Additional FDIC ProtectionYou can rest assured that your cash is
protected. Money in an Insured Deposit Account (IDA) can be deposited into two
banks. Having cash deposited at two banks allows you to obtain up to twice the
standard FDIC coverage.
Earn interestPut your cash to work. Even when your balance isn’t
invested in securities, it will still be earning interest.
Personalized HelpYou can speak with us at 888-623- 6270 to set up
your account, activate features, or make a transfer.
Four Steps to Debt Reduction
Easy access to credit can
contribute to a lifestyle that starts out with debt and gets worse as spending pressures
increase. If you’ve accumulated debt, how can you dig yourself out?
Calculate Exactly What You Owe:
List your debts and minimum monthly payments, due dates and interest rates.
Rank debts from highest rate to lowest. Decide if any debt is worth keeping.
Consider mortgages and college loans since interest on most mortgages is tax deductible
and many college loan rates are reasonable.
Set Up a Budget and Start
Eliminating Your Debt: A budget helps you decide how much extra cash you can devote
to paying debt. It also helps you identify expenses that you can cut back on,
which leads to more cash to further reduce your debt.
Lower Your Borrowing Costs:
Compare what rates credit card firms are offering. Then get your current credit
card company to match the attractive rate you discover. Or, transfer your
current higher interest-rate balance to a company offering a lower rate.
However, make sure you find out how long this lower rate will last and what the
regular ongoing rate will be. Also, be on the lookout for balance transfer
fees.
Cash Is King: Try to stick to
cash and/or use a debit card. Unless you have developed a disciplined approach
to pay off the balance, do all you can to avoid using a credit card. Find one
card with a low rate for situations that may require one, like Internet purchases,
but be sure to pay it off every month.
©2012 Morningstar, Inc. 2012 RL Paler Investment Advisors,
LLC All Rights Reserved. The information contained herein (1) is intended
solely for informational purposes; (2) is proprietary to Morningstar, RL Paler
Investment Advisors, LLC and/or the content providers; (3) is
not warranted to be accurate, complete, or timely; and (4) does not
constitute investment advice of any kind. Neither Morningstar, RL Paler Investment
Advisors, LLC nor the content providers are responsible for any damages or
losses arising from any use of this information. Past performance is no
guarantee of future results. "Morningstar" and the Morningstar logo
are registered trademarks of Morningstar, Inc. Morningstar
Market Commentary originally published by Robert Johnson, CFA, Director of
Economic Analysis with Morningstar and has been modified for Morningstar
Newsletter Builder.
No comments:
Post a Comment