Active money management means taking advantage of market volatility

At a financial planning workshop we recently hosted at MomCom Austin, we fielded the following question: with the stock market so unpredictable, should I be putting some of my money in cash? The easy answer is yes, you should always have some money in cash. We advocate having six times your paycheck, or three month’s salary, in a money market account for easy access. This is your emergency fund for unexpected expenses like car repairs and medical emergencies. Keep this account replenished. But that’s just the first level of the “should I move money to cash” conversation. We are strong believers in transparency in your investments and the continuous ability to move your money to cash positions when the market calls for it. This is the essence of active money management and it allows us to avoid being fearful of market volatility. This is important because we know that market downturns can yield attractive buying opportunities. The key is to stay poised for investment opportunities when they arise. Your age and your risk tolerance level will determine how much risk you should be taking in the equity market. In general, the closer you are to retirement, the less risk you should be taking. As an alternative to cash, we look at individual corporate bonds with less than two years to maturity. The yield to maturity rate plays a key factor in our decision to purchase these bonds. We steer clear of bond funds and we avoid long-term bonds as well because we don’t like to lock ourselves into a rate for more than two years Overall, though, we would caution against pure volatility being the deciding factor in moving your investments from the stock market to cash. By definition, volatility means the stock market is moving up as well as down and active money management allows investors to take advantage of that volatility. These conditions create opportunities for both purchases… | Read More »

Annuity fine print can cost you money.

Recently a client of ours came to us with an indexed annuity that he had just bought and wanted us to take an independent look at.  We called the annuity company with him and asked a wide variety of questions to better understand the terms and conditions of the product.  Our clients’ main concern was how he could access his money.  What we found out was news to our client and he didn’t like what we learned. This particular product had ten-year surrender period.  This means if our client needed to pull his lump sum of money out he would have been charged between 12% and 4% depending on which contact year he did so.  He did have access to 10% of the contract value every year without penalty but not until the second contract year.  This annuity also had a lifetime income payment benefit.  The longer he waited to access this benefit the higher percentage of his benefit base value he could access.  At our clients current age he could access 5.2% a year for the rest of his life.  The major problem with this was that once he attempted to access this income rider, the payment amount was fixed for life, which would not keep up with inflation.  This benefit was costing our client .95%. After the phone call I asked our client what he told the people who sold him this product.  He said, “I want to be able to access my money when I need it.”  This statement threw up a giant red flag to me because this particular annuity had plenty of limitations on how he could access his money.  Then I looked at the start date of this contract and realized that he had purchased this product within the last month. I immediately thought of the free look period. Every insurance-based product has what is called a free look period, which varies by company… | Read More »

Make health your priority when you create a financial plan

While my main role as my clients’ financial advisor is to focus on their economic health, I often counsel them on matters related to their physical, emotional and spiritual health as well. No matter how you define your retirement, you have to prepare for it by nurturing all four aspects of your life. The easiest aspect is the one that has inspired thousands of cottage industries in this country. But your physical health doesn’t require an acai berry shake, a thigh master or the latest how-to-lose-weight-and-eat-what-you-like book. It’s much simpler than that. Keep an eye on what you eat and include plenty of fresh fruits and vegetables. Pay attention to the source of your food as well. Exercise even if, like me, you don’t think you enjoy it. Try to get enough fresh air every day and enough sound sleep every night. Don’t avoid your annual checkups. Just as important as your physical health are your emotional health and spiritual development. Take time to nurture your friendships. We’re all busy, but we can and should find time to chat with our friends, play a little Bunco or enjoy a special meal. Value the time you spend with your family members. Spend some moments in quiet reflection and appreciate your faith. Find ways to strengthen it, through prayer or study. Pay attention to your finances too. Choose wisely the means by which you’ll grow your investments. Don’t allow someone to sell you a product when they should be helping you formulate a plan. Understand that even with vigilant attention to your physical health, you could face unexpected threats to your financial health. Accidents, illnesses, financial setbacks to love ones, all pose threats to the retirement you envision. Review your plan quarterly and reevaluate your goals and your risk tolerance. Even if you don’t plan to live until you’re 156 like I do, you need to plan carefully and pay attention to… | Read More »

The Real Secret to a Happy Retirement

I just heard a story from a friend who is 67-years young. Patsy is beautiful, vibrant, hilarious and fun, fun, fun.  She told me that she recently asked her 86-year old mom when she might expect to find herself living her “Golden Years.” Her Mom laughed and said “Are you kidding?  I just asked my 93 year old cousin the same thing! You might as well stop wishing.” Based on that, Patsy then gave me this excellent advice. “You just have to go out and live,” she said. “Enjoy every minute of the good, the bad and the ugly … and do it NOW! Laugh as often as possible, sing or dance every day and tell every story bigger than it was.” I liked what Patsy had to say and think that it contains a very important nugget ~ the “Golden Years” are not necessarily what they used to seem to be. We are all living longer, healthier lives.  Most people of retirement age are not even remotely interested in quitting and sitting and watching life happen around them. They are up for being involved and interested.  It may be a slower life they are looking for, but hardly anyone is interested in just plopping down, doing nothing. I asked Patsy if she had retired.  She exclaimed “Heck, no!  I tried retirement and I bored myself silly.  Plus, my husband and I would get on each other’s nerves day and night!  I’ve GOT to get out of the house and be productive.”   She currently works part-time as a book keeper at a salon.  It’s what she had been doing for 25 years and she’s good at it — she just didn’t want to do it 8-10 hours a day.  She chose her hours, made a little extra money and helped a new business get off the ground. Believe it or not, that is a snap-shot of what many “retirees” are… | Read More »

Take advantage of your life insurance policy’s free look period

The process of buying life insurance can be overwhelming at times, with so many different variations and available options. For this reason it is very important that you be an informed consumer.  It is important to remember that you have the power of choice in regards to with whom you do business. You need to believe that the agent helping you find answers and solutions to your insurance needs truly has your best interests in mind. Never hesitate to ask a question if you don’t understand something that an insurance professional is telling you.  If that professional shies away from certain topics or redirects you without answering your question, it is a big red flag. As the consumer you have a right to know all of the options available to you, along with the pros and cons of each option.  This allows you to make the best decision and find the best fit for your specific insurance needs. If at any time you are unsure seek a second opinion from an independent insurance agent who isn’t tied to just one company. Even if you have taken delivery of a new policy you have between 10-30 days to change your mind in what is called a Free Look period.  Be sure to ask how long a company’s free look period is.  In this period you can return your policy for a complete refund of any premium paid in. If you have unanswered questions we can help you find answers. Our insurance department at Winch Financial prides itself on taking the time necessary to get all of the facts and options before making a recommendation. Think of us as a resource.