Current Affairs

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Successful Investors Keep Seatbelts Fastened

Successful Investors Keep Seatbelts FastenedLooking back two years, U.S. stocks have risen more than 30 percent. There have been occasional dips along the way, though the rise has been pretty much non-stop. The first week of February 2018 jolted investors back to reality, as stocks fell more than 10 percent in a short period of time. The numbers themselves sounded scary. The Dow Jones Industrial Average fell 1,800 points in a few days; it was easy to forget the drop was from record heights of 26,000. Since then, markets have recovered more than half of that unnerving slide.

Successful Investors Keep Seatbelts Fastened

It’s a challenge to remain calm during a substantial market decline for some investors. Once again, we have witnessed how important it is to block out “The sky is falling!” media warnings. Emotional reactions are likely to be detrimental for investors. The fact is volatility is a normal part of investing. It is always there. It’s interesting to note that we most often see the term “volatility” used when markets fall, and yet markets are “volatile” on the upswing, too, as we have seen for a good stretch of time.

Investors are well-advised to “stay in their seats with seatbelts fastened” when things get bumpy. Intra-year market declines are common, according to academic research by Dimensional Fund Advisors (DFA). Looking back to 1979, DFA found that about half the years experienced declines at some point of more than 10 percent. Despite those significant drops, calendar year returns finished positive 32 of 37 years.

The DFA study also determined that trying to avoid short-term losses through market timing is apt to hinder long-term performance. A substantial piece of long-term stock returns comes from just a handful of up days. An investor attempting to time the market is all too likely to be on the sidelines on strongly positive days. Through the period of 1990 to 2017, missing out on only the five best days cut returns by a full one-third.

As the markets jump and jolt, try to remain seated and relaxed. Better yet, get up and do something you enjoy. Go for a walk or out to a movie, and let the markets do what they will from day to day knowing that you have a long-term plan.

By |April 16th, 2018|Current Affairs, Investing|

Understanding RMDs

Patrick Eng writes about the importance of understanding RMDs.When investors with retirement accounts turn 70 ½ years old, they should be aware of the required minimum distribution (RMD) rules regarding the type of retirement accounts they possess. Understanding RMDs will help you avoid high penalties from the IRS. Here are some things to keep in mind.

The IRS requires that account holders of traditional IRA, SEP IRA, Simple IRA and company-defined contribution plans [401(k), 403(b) and 457] withdraw a certain minimum amount from their accounts each year. (Roth IRAs do not have an RMD.) If you continue working past 70 ½ years, many defined contribution plans will allow you to put off taking the RMD until you retire; but for all non-Roth IRAs, you have to start taking RMDs by April 1 of the year following the year in which you turn 70 ½, even if you are still working.

This is an annual requirement until the account is drawn to zero or until the account holder dies, in which case the assets can be placed into an Inherited IRA for a beneficiary or distributed to heirs in another way. A penalty of 50 percent is levied by the IRS on the amount not withdrawn. For example, if your RMD is $10,000 and you do not make your withdrawal, you will owe the IRS $5,000 in penalties and must still take your required distribution.

The IRS does not allow tax-deferred accounts to grow indefinitely without having to pay taxes on the money. Investments in a tax-deferred retirement account have been sheltered from taxes since their initial contribution and throughout the accumulation and investment period. Thus, the IRS places a time limit on this tax deferral and mandates withdrawals through the RMD.

Most financial institutions have a process to help their clients take care of their RMDs, but ultimately the responsibility lies with the account holder. It can be an expensive oversight if not taken care of in a timely manner. If you are approaching the age for RMDs, talk with your advisor.

By |February 27th, 2018|Current Affairs, Retirement|

How Do You Define Wealth?

Mike McCannAmericans are split on their definitions of wealth, according to a recent survey by Charles Schwab, with some describing wealth as a specific sum of money and others describing it more as a state of mind. When asked “How do you define wealth?” the top five sentiments were:

  1. Having a lot of money (27 percent)
  2. Enjoying life’s experiences (24 percent)
  3. Being able to afford anything they want (22 percent)
  4. Living stress-free and having peace of mind (19 percent)
  5. Having loving relationships with family and friends (12 percent)

When asked to express how much is required to be considered “wealthy” in America, the average response was $2.4 million — nearly 30 times the actual median net worth of U.S. households according to the U.S. Census Bureau. Yet, when asked to compare two opposing ideas of wealth at a more personal level, Americans leaned into things that money can’t buy.

  • 65 percent equate wealth with having good physical health vs. having lots of money (35 percent)
  • 58 percent say wealth is about having gratitude vs. having money (42 percent)
  • 56 percent believe wealth is about building community vs. working on one’s career (44 percent)

“Wealth is often thought of as a lofty, unattainable number that doesn’t apply to most of us, but that’s an old-fashioned notion that needs to be retired,” said Terri Kallsen, executive vice president and head of Schwab Investor Services. “It doesn’t matter whether you have a lot or a little. What matters is that you think about the money you have as your wealth, and that you pay attention to it. Being engaged is the only way to reach your personal goals.”

“Money is a strange thing. It ranks with love as our greatest source of joy, and with death as our greatest source of anxiety.” – Joe Moore, offensive line coach at Notre Dame under Head Football Coach Lou Holtz (’80s- ’90s)

How do you define wealth? Whether you think of wealth in terms of mindset or assets, it’s important to keep your financial and personal goals in your sightline as you tackle day-to-day life. The New Year is a great time to take a fresh look at your financial plan. Your Perspective Financial advisor would love to take the time to review it with you. Call or email us any time.

By |January 30th, 2018|Current Affairs, Financial Planning|

18 Cyber Security Tips for 2018

cyber security

18 Cyber Security Tips for 2018

Here are 18 helpful cyber security tips for 2018 to keep your electronic data and devices safe.

  1. You are an attractive target to hackers. Don’t think, “It won’t happen to me.”
  2. Lock your computer when you are away from it. Even a few minutes is enough time for someone else to destroy or corrupt your information.
  3. Avoid unintentionally installing spyware on your electronic devices; never click on links within pop-up windows.
  4. Be wary of free downloadable software; you may be exposing your computer to spyware programs by downloading programs from questionable websites.
  5. Install both anti-virus and anti-spyware software on your computer, and make sure they are compatible.
  6. Take a little time to review, understand and use the privacy settings on social networking sites.
  7. Turn off the option to automatically download attachments in emails.
  8. Be wary of unsolicited attachments in email, even from people you know.  Many viruses can “spoof” the return address, making it look like the message came from someone else.
  9. Use different passwords on different systems and accounts.
  10. Don’t use passwords with personal information that can be accessed or guessed; use capital and lowercase letters, numbers and characters.
  11. Report spam email messages.
  12. Never click on a link in an email from someone you do not know.
  13. Stay safe when shopping online. Only do business with reputable vendors. Some cyber attackers create malicious websites that appear to be legitimate; always verify the site before supplying any personal or financial information.
  14. Never plug an unknown USB drive into your computer to try to identify or locate the owner.
  15. Monitor your accounts (email, social media, banking, etc.) for any suspicious activity. If you see something unfamiliar, it could be a sign that you’ve been compromised.
  16. Disable Bluetooth when you’re not using it, to help prevent hacking.
  17. Hackers have strategies for attacking devices through public Wi-Fi. Keep firewalls enabled at all times; turn off file sharing when using  public Wi-Fi.
  18. Remember you can be a victim of cyber crime offline, too.  If someone calls asking for sensitive information, say no. Call the company directly to verify before giving out information.

Sources: Department of Homeland Security; Heimdal Security; Cisco

By |January 3rd, 2018|Current Affairs|