Mid Year Perspective

It’s been a rough few weeks, but view matters in perspective: The blue-chip Dow Jones Industrial Average enters Friday on track for its best first-half performance (a gain of 14.7%) since 1999, when it rose more than 19% (and finished the year up 25%). The index is also headed for its best second-quarter performance, up 3.1%, since 2009. Not too shabby.
 
Source: Brendan Conway, Barrons

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

Cost of Consumer Borrowing Could Rise

For consumers, last week's Federal Reserve announcement is a mixed bag.

Chairman Ben Bernanke said the Fed would leave the federal funds rate untouched at 0.25 percent. The committee will also continue its program of purchasing $85 billion in Treasury bonds and mortgage-backed securities each month, although Bernanke said it could taper off that purchase later this year.

Much of the banking and borrowing consumers do is tied to that federal funds rate, which means rates aren't rising anytime soon.

"The Fed would actually have to boost short-term rates, which they're unlikely to do until 2015," said Greg McBride, senior analyst for Bankrate.com.

The notable exception: Mortgage rates, which are tied to 10-year Treasury yields, have risen over the past month as those yields have, on the hints of Fed tapering. According to Freddie Mac, rates on a 30-year-fixed mortgage were 3.98 percent in early June, up from 3.35 percent a month earlier.
Still, even as the Fed maintains the status quo, consumers are seeing some shifts in offers that could affect their rates:

Credit Cards - Competition for customers with good or excellent credit has actually pushed rates on new credit cards down in recent. The average rate for borrowers with excellent credit was 12.79 percent during the first quarter of 2013, down from 13.01 percent in the last quarter of 2012, according to the site. Rates also dropped slightly for business credit cards and student credit cards.

Continued economic improvement, combined with low rates, also makes lenders more willing to dangle zero-percent introductory offers. The average terms for no-interest balance transfer and purchase offers are both slightly more generous than a few months ago, with most cardholders getting a little more than 10 months' reprieve.

And if you're paying down a balance? Most cards do have variable rates, but they aren't going anywhere until that prime rate rises, he said. Federal law prohibits issuers from raising rates on existing balances unless the cardholder is more than 60 days delinquent.

Mortgages - House hunters and would-be refinancers may have missed their window of opportunity. Rates are likely to keep trending higher. Borrowers could see the rate for a 30-year fixed-rate mortgage hit 4.25 percent by next week.

Consumers who are partway through the process have some ability to halt hikes. If you've got a deal that works at 4, 4.25 percent, lock it in. Ask about so-called float-down options, which, if rates drop, allows for that locked in rate to fall too. That can add several hundred dollars to the cost of the loan, but may work in borrowers' favor, he said.

Checking and Savings Accounts - Sorry, savers—no good news here. Rates on CDs, savings accounts and checking accounts aren't likely to move until the Fed raises interest. A one-year CD yields 0.62 percent, while an interest checking account yields 0.50 percent.

But there are still opportunities to eke out a slightly higher return for emergency funds and other liquid savings. A recent Bankrate.com report found 56 high-yield accounts across the country offering an average 1.64 percent.

Source: Kelli B. Grant, CNBC

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

 

Median Retirement Balance Is $3,000 for All Working-Age Households

The median retirement account balance for all working-age households is just $3,000, according to a research report from The National Institute for Retirement Security. For households near retirement, the median balance is just $12,000.

That includes all households, including those who haven’t saved anything. The median balance among working-age households who do have a retirement account is $40,000, while those closer to retirement have a median balance of $100,000.

The NIRS report, “The Retirement Savings Crisis: Is It Worse Than We Think?” used data from the Federal Reserve’s 2010 Survey of Consumer Finance to determine how well Americans are saving for retirement and what still needs to be done.

“Retirement anxiety is running high and retirement confidence is running low,” Diana Oakley, executive director for NIRS, said. According to the research gathered this year by NIRS, 85% of respondents are concerned about retirement, and 55% are very concerned.

Oakley noted that with the defined contribution system, it’s hard for participants to identify how they’re doing in terms of saving for retirement, and few think it will get easier. Only 2% of respondents said preparing for retirement would be easier in the future.

Additionally, of those surveyed, more than 38 million Americans, or 45%, have no retirement assets, NIRS found. Among those near retirement, more than 40% have saved nothing.

The report found those who do have retirement accounts tend to be better off. Median income for households with retirement accounts was over $76,000, compared to $30,000 for households without accounts. Nine out of 10 households in the top income quartile have retirement accounts, compared with about a quarter of those in the lowest quartile.

About 80% of all households have saved a total smaller than their annual income for retirement. More than 60% of those near retirement have less than a year's income, including 31% who have saved nothing. Less than 3% of all households have saved four times their income or more.

The report referred to benchmarks from Fidelity and Aon Hewitt that recommend Americans save between eight and 11 times their income for retirement. Fidelity recommended workers increase their multiple by one every five years—a 35-year-old should have a year's income, while a 65-year-old should have saved seven times their income. Aon Hewitt recommended savers reach 11 times their income by age 65.

Source:  Danielle Andrus, AdvisorOne

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

One of the fastest-growing breeds of income generators

Senior bank loan Exchange Traded Funds (ETFs) are emerging as one of the fastest-growing breeds of income generators. The most popular of these ETFs, the PowerShares Senior Loan Portfolio (BKLN), raked in $1.5 billion in the first three months of 2013 alone.

These ETFs track senior secured bank loans—variable-rate loans that are made by banks to non-investment-grade companies and secured by real estate or some other asset. The rate on the loans changes every 30 to 90 days and is usually pegged to the London Interbank Offered Rate (LIBOR).

Investors are attracted to these ETFs for a number of reasons, including recent yields of around 4%. When the rates on the portfolio loans rise, the ETF yields follow suit, which makes them especially attractive in a rising-rate environment. With a minimal correlation to fixed-rate bonds, senior secured bank loans also provide diversification for income portfolios.

Because these loans are senior to bonds and stocks in a company’s capital structure, investors go to the head of the payback line if a borrower hits tough times. Some investors have dubbed the loans “high yield light,” since the combination of floating rates, loan collateral and position in the corporate capital structure makes senior secured bank loans less risky than traditional high-yield bonds.

Although the ETFs are fairly new, institutional investors and mutual funds have been investing in senior secured bank loans for over 20 years. In a report issued in April, Morningstar, which has been tracking the bank loan sector since 1989, noted that the group typically shows positive performance even during recessions.

While there could always be another recession, there’s no reason to panic or avoid bank loan investments, says Morningstar ETF analyst Timothy Strauts.

Source:  Marla Brill, Financial Advisor magazine

PowerShares Senior Loan Portfolio (BKLN) is a component of the D2 Capital Management Multi-Asset Income Portfolio.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.
 

The Growing Tax-Benefit Appeal of Munis

Municipal bonds are once again yielding more than Treasuries.

The yield on the average 10-year municipal bond is just over 100 percent of the yield on a 10-year Treasury, up from less than 90 percent less than a month ago. And that’s during a period in which Treasury yields themselves have risen substantially.

For investors who pay taxes, that makes muni yields quite attractive.

There’s a long list of reasons why muni bond yields have risen (and prices have suffered) in recent months, including fears that the city of Detroit might go bankrupt and that the tax benefits of municipal bonds might be reduced by the federal government.

Investors have to closely scrutinize the credit quality of issuers, since bond insurers now play a much-diminished role after the financial crisis. Larger differences in prices and yields for different levels of credit quality are beginning to appear, so it’s not a good idea to buy a handful of municipal bonds and put them in a drawer. Owning a broader, well-diversified group of municipal bonds, perhaps through a municipal bond fund, is a better bet.

All that said, municipal bankruptcies remain quite rare, and the financial condition of state and local governments continues to improve. There’s also the fact that higher tax rates have increased the tax benefit of owning municipal bonds.

For most tax-paying investors, munis should continue to be a core holding of a well-diversified portfolio.

Source:  Simeon Hyman, CFA, BloombergBlack Chief Investment Officer

D2 Capital Management's Tax Free Income Portfolio consists of a diversified mix of highly rated municipal bond mutual funds.  The Portfolio currently has a 1.96% SEC 30 day yield and a 3.20% trailing 12 month yield which results in a 4.4% tax equivalent yield for an investor in the 28% Federal Income Tax bracket (as of 13 June 2013).

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

Your marriage and the IRS

When you get married, your tax situation changes — for better or for worse. Here are the most important things to know.

Married at year-end means married for the whole year - Your marital status on December 31 determines your tax filing options for the entire year. If you’re married at year-end, you only have two choices: (1) filing jointly with your new spouse or (2) using married filing separate status for a separate return based on your income and your deductions and credits.

There are two reasons why most married couples file jointly.

• It is simpler. You only have to file one Form 1040 and you don’t have to worry about figuring out which income, deduction, and tax credit items belong to which spouse. Other things being equal, simple is good!
• It is often cheaper too. That is because using married filing separate status makes you ineligible for some potentially valuable tax breaks such as the child-care credit and the two higher-education credits. Therefore, filing two separate returns often results in a bigger combined tax bill than filing one joint return.

If you file jointly, you’re on the hook for your spouse’s tax misdeeds - Despite the preceding advantages, filing jointly isn't a no-brainer for one big reason: for any year that you file a joint return, you’re generally “jointly and severally liable” for any federal income tax underpayments, interest, and penalties caused by your new spouse’s unintentional tax errors or omissions or deliberate tax misdeeds. Joint and several liability means the IRS can come after you if collecting from your spouse proves to be difficult or impossible. They can even come after you long after you’ve become divorced.

In contrast, if you file separately, you have no liability for your spouse’s tax screw-ups or misdeeds. Period.

Bottom line: If you have doubts about your new spouse’s financial ethics in general and attitude about paying taxes in particular, I suggest filing separately until those doubts are dispelled. While your tax bill might be somewhat higher than if you file jointly, it could be a small price to pay for “insurance” against the joint-and-several liability threat.

Will you pay the marriage penalty or collect the marriage bonus? - You’ve undoubtedly heard about the tax penalty on marriage. It causes some (but not all) married joint-filing couples to owe more federal income tax than if they had remained single. The reason: at higher income levels, the tax rate brackets for joint filers aren't twice as wide as the rate brackets for singles.

On the opposite side of the coin, many married couples actually collect a tax bonus from being married. If one spouse earns most or all of the taxable income, it is highly likely that filing jointly will reduce your tax bill (the marriage bonus). For a high-income couple, the marriage bonus can be several thousand dollars a year.

Bottom line: If you and your new spouse both earn healthy and fairly equal incomes, you’ll likely fall victim to the marriage penalty. If not, you’ll likely collect the marriage bonus.

Selling an appreciated home after getting married - Say you and your spouse both own homes. If you sell yours for a profit, up to $250,000 of the gain will be free from any federal income tax if you owned and used the home as your principal residence for at least two years during the five-year period ending on the sale date. The same is true for your spouse. So you could both sell your respective homes, and you could both potentially claim the $250,000 gain exclusion deal — for a combined federal-income-tax-free profit of up to $500,000. Nice!

Say you sell your home, and you both move into your spouse’s home (this could happen before or after you get married). After you’ve both used that home as your principal residence for at least two years, you could sell it and claim the larger $500,000 joint-filer gain exclusion. In other words, you could potentially claim a $250,000 gain exclusion on the sale of your home, and with a little patience claim a later $500,000 gain exclusion on the sale of your spouse’s home. That is what I would call good tax planning!

Needless to say, there is more to the story. For additional information, check out IRS Publication 504 (Divorced or Separated Individuals) at www.irs.gov. The name of the publication is misleading. It actually has almost as much to say about getting married as getting divorced or separated.

Source: Bill Bischoff, Tax Watch

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

Turning 50? Time for a retirement tuneup

Fifty may be the new 30 when it comes to how you feel—and if you’re Madonna, how you look—at midlife. But those ages are worlds apart when it comes to planning for retirement. By 50, the end of full-time work has come into view, however distant, on the horizon. 

This makes the half-century mark a great time to take stock—and, if you haven’t done it already, to evaluate whether you’re on track to enjoy financial and physical well-being when you retire. At 50, experts say, there’s still time to play catch up and make adjustments if needed to protect your health and wealth for the next phase, but doing so gets harder with each year you wait after that. If you start at 50, it’s possible everyone can get what they want, but if you start at 64, there’s less flexibility. 

A good place to begin is by imagining your perfect retirement. It helps to get some sense of the big-picture goal before assessing what obstacles might lay in its path. And life partners should compare notes with each other. It’s better to discover sooner rather than later that one person’s idea of retirement bliss is a house overlooking the seventh tee, while the other dreams of an apartment in the city. 

To be sure, folks at 50 have many other demands on their time and money: college tuition or wedding payments for their kids, support for aging parents, and serious work obligations. Yet you should fight the impulse, however understandable, to put retirement on the back burner in your early 50s.  Actually is the most critical time.” 

Here’s a checklist to help 50-year-olds stay on track for a retirement that’s healthy in every sense of the word: 

Get your paperwork in order -If you don’t have a health-care or financial power of attorney, now is the time to put them in place. The former names a person, known as an “agent,” to make health-care decisions on your behalf if you become too sick or mentally impaired to do so. Similarly, the latter names an agent to handle your financial affairs if you’re no longer able to do so. It’s important to establish these before a crisis strikes—if a person becomes incapacitated without these documents in place, then family members will need to go to court to establish a guardianship, or conservatorship, as it’s called in some states. Review beneficiary designations on your life insurance policies and investment accounts, and make sure your will is up-to-date. 

Protect yourself - Slightly more than 25% of today’s 20-year-olds will incur a long-term disability—one that renders them unable to work for a year or more—before reaching age 67, according to the Social Security Administration. But 69% of the private- sector workforce has no long-term disability insurance. What’s more, the group long-term disability plans that people get through their jobs typically cover just 60% of their salaries in the event of a disability. (And some policies only cover 60% of the base salary, so those who rely on bonuses for their total compensation will come up even shorter.) At that level, most disabled people won’t be able to meet day-to-day expenses, much less contribute to their retirement savings accounts. 

To make up for the shortfall, or to obtain coverage in the first place if work offers none, many people would benefit from buying an individual disability policy, she said. Such coverage isn’t cheap, however, especially for high earners. Premiums for a hypothetical 45-year-old male attorney making $150,000 a year would average $3,000 per year, for a policy that would pay a benefit of $7,500 per month until age 65. 

Fifty is also a good age to start thinking about how you might pay for long-term care, which Medicare doesn’t cover. Long-term care insurance has become expensive and harder to obtain, but it’s still worth a look for healthy people in their 50s, some advisers say. Others advocate life insurance policies with a long-term care rider. Those without children in particular might also think about developing their social support networks, experts say; such networks can often help older people stay at home for longer, among other benefits. 

Create a retirement budget - Without a budget you have no way of knowing whether your savings will come up short after stopping work. Instead of starting with an arbitrary dollar goal, like $1 million, figure out how much you’ll need to live each month and project out from there, experts advise. A financial planner can help by stress-testing your projected nest egg under different market conditions and life spans. Make a plan to eliminate credit card debt and consider paying off your mortgage before you stop work. Be sure to build in a cushion for unexpected expenses: a recent Ameriprise Financial survey found unforeseen losses and expenses such as a market decline or the need to support a grown child cost Americans an average of $117,000 in retirement savings. 

Reassess your portfolio - Check to see that your current asset allocation is appropriate for your goals. The old rule of subtracting your age from 100 to calculate your portfolio’s stock allocation is a thing of the past, advisers say. Unfortunately, there’s no easy formula that has replaced it. It’s important not to be too conservative in your 50s, since you’ll need portfolio growth to fund a retirement that could stretch for three decades. Today, many investing pros are expressing concern about bonds, whose yields have been rising and prices falling. Those who invest in individual bonds and hold them to maturity won’t be affected by this trend, but those holding bond mutual funds could lose money. If you’re invested in target-date funds, all-in-one mutual funds that rebalance your portfolio as you get closer to retirement, Bob Pozen, a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution, recommends taking another look at them to make sure you’re comfortable with the asset mix. Many people were shocked during the market crash of 2008 to see their supposedly conservative target-date funds drop sharply in value. Don’t assume the target-date fund is taking care of you. 

Reassess your career - Can you envision staying at your current job for the next 15-plus years? If not, it might be time to make a change. An advisor recently coached a client in his early 50s through a career shift. The man had worked as a senior sales manager, a high-powered, high-stress job. While he was successful, the client didn’t see himself sustaining that pace into his late 60s. Yet he couldn’t afford to retire early. So he shifted over to a curriculum development job, where he writes sales training materials and conducts trainings. His total compensation isn’t quite as high as before, but it’s more stable because it isn’t commission-based, and the man can envision working at his new, less frenetic pace until retirement. 

Play catch up - The IRS allows people 50 and over to make “catch-up contributions” to their tax-advantaged savings accounts. Those maximum amounts for 2013 are $5,500 for 401(k)s (on top of the maximum of $17,500 for those under 50) and $1,000 for IRAs above the under-50 limit of $5,500. 

Source:  Elizabeth O'Brien, Retire Well

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

U.S. Notches Biggest Gain in Oil Output

U.S. crude-oil production grew by more than one million barrels a day last year, the largest increase in the world and the largest in U.S. history.

In the latest sign of the shale revolution remaking world energy markets, crude production in the U.S. jumped 14% last year to 8.9 million barrels a day, according to the newly released Statistical Review of World Energy, an annual compilation of industry trends published by British Petroleum.

The wave of new crude, flowing in oil fields from North Dakota to south Texas, helped keep the global market adequately supplied and helped markets weather declining oil production elsewhere in the world."The growth in U.S. output was a major factor in keeping oil prices from rising sharply, despite a second consecutive year of large oil supply disruptions," said BP Chief Executive Bob Dudley.

In volume terms, last year's U.S. production gain of 1.04 million barrels a day surpassed the earlier biggest annual increase of 640,000 barrels per day, recorded in 1967.

Beyond the U.S., oil production increased almost 7% in Canada, raising North America's profile as a global oil producer.

Source:  Wall Street Journal

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

Keeping things in perspective

Stocks closed broadly lower on Wednesday, with the Dow industrials posting their first three-day string of losses this year.

Entering Wednesday, the Dow had gone 112 trading sessions without three down days in a row, the longest such period in the blue-chip index's history.

The winning streak reflected the steady demand for stocks that had given the market a strong start to the year and kept selloffs short and shallow. The end of the streak comes as investors are more uncertain about the course of Federal Reserve policy, which has been an important driver of the stock market's rally.

"The market had a year's worth of gains in four months," said Tim Hoyle, director of research with Haverford Trust, which oversees about $7 billion of assets. "Volatility coming back doesn't surprise us. We're due for a little bit."

"The way that the market was acting, going up in a straight line, was unsustainable," said Andres Garcia-Amaya, global-market strategist at the mutual-fund arm of J.P. Morgan Asset Management, which oversees $400 billion. "I do expect markets to get a little bit more wobbly."

Source:  Wall Street Journal

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

Millennials Make Most of Massive Inheritance: Study

There are four things you can do with a pile of money: spend it, give it to charity, give it to Uncle Sam or give it to your children. For years, maybe centuries, the last has been the least favorite option.

But the fact is that young Americans—the group known as millennials—are inheriting their wealth at a greater rate than the two previous generations. Among those under 32 years old with up to $1 million to invest, a third inherited their money, according to a study released this week by the wealth research firm Spectrem Group. Fewer than a quarter of Gen Xers or baby boomers can say the same.

Of those who have more than $1 million to invest, the disparity is even larger in favor of the millennials.

The good news is that the millennials may also be the generation most suited to their sizable inheritance. The youngest U.S. adults are shown in survey after survey to be conscious that the American Dream is no longer a guarantee, and that knowledge seems to have made them better savers, more risk averse and more worried about their retirements than their parents or their grandparents.

They are even worried about their parents.  And indeed, Spectrem's study found that a greater percentage of millennials were concerned about caring for aging parents than they were about their own health.

Source:  Paul O'Donnell, CNBC

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

 

From market highs to lows: Panic doesn't pay

No one can predict what the market will do in the future, but remaining "in the game," continuing to invest in line with an expected retirement date, having a solid plan in place, and setting goals can help all investors prepare for potential unexpected future market movements.

Timing the market doesn’t pay.

Although it may be tempting to actively alter your investments in an attempt to avoid loss in anticipation of market lows, historical data show that such efforts tend to backfire.   Those who stayed the course fared substantially better than those who retreated altogether or tried to time the market.

Being in it for the long haul

While the only predictable thing about market behavior is its unpredictability, history has shown repeatedly that continued investing and diversified, age-based asset allocation has delivered better results over time. Three important things to consider:

• Diversification. A diversified portfolio with a well-balanced mix of stocks, bonds, and shorter-term investments is likely—over at least a full market cycle—to provide a superior outcome than a portfolio that is biased heavily toward one or two asset classes.
• Stability. During turbulent times, a steady course is most often the best one. A reactionary approach, including a focus on short-term market activity and related attempts to time the market, typically leads to poorer outcomes in the long term.
• Guidance. Investors don’t have to go it alone. Professional guidance can help minimize some of the historical behaviors that investors tend to have, not only regarding asset allocation but for retirement planning as a whole. Better retirement decisions are made within the broader context of planning for all life’s goals.

By taking a long-term approach to investing and considering the importance of full retirement plan participation and age-based asset allocation, investors can have a solid plan for retirement. Ultimately, the key to success amid market volatility is participation, not panic.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.

When Is $30K Worth $90K? When You Save It In Your 20s

Recent college graduates who score their first job might be tempted to splurge on a new car or an apartment that's a little out of their price range. But 20-somethings are in an incredibly unique position to set up their financial future, if only they could teach themselves to think backward about retirement savings .

It sounds like a math trick, but it's really just harnessing the power of time: Someone who saves for retirement during their 20s and completely stops a decade later will have more at age 62 than someone who starts saving in their 30s and spends the rest of his or her adult life trying to catch up. Yes, 10 years of savings can be worth more than 30 years of savings. This may be the only time when something that sounds too good to be true really is true.

If you know someone who's recently graduated or started a first job, sit them down and show them what personal finance advisers call "The Parable of the Twins."

Liz Weston, in her book Deal with Your Debt, offers this simple illustration. One twin puts aside $3,000 every year in a Roth IRA starting at age 22, and stops at 32. She never adds another penny. Her brother starts saving $3,000 annually at 32, and continues until age 62. Who has a larger retirement kitty?

Assuming an average 8 percent return annually, the twin sister wins rather handily. She has $437,320, compared to her brother's $339,850, even though she contributed two-thirds less of her own money than her brother ($30,000 vs. $90,000).

Of course, different assumed returns would change the grand total, but lower or higher rates don't change the fundamental principal: Dollars saved in your 20s are worth a lot more than dollars saved later in life.

"It's counterintuitive for people to open up their time horizons, but the difference it makes is incredible," Weston said. "We focus on our immediate past and present at the expense of the future."

And that can get pretty expensive. Thanks to compounding returns, every $1,000 that someone in their 20s doesn't save costs them more than $10,000 at retirement.

"You rob the money of time to earn returns, and time for those returns to earn returns," she said. "If you put it off, it gets increasingly hard to catch up."

Source:  Bob Sullivan, NBC News

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.