Month: July 2016

We all have annual rituals – from New Year’s resolutions to spring cleaning. This year, add one more: a midyear financial checkup. And what better time to do it than summer, when other obligations often ease?

We recommend evaluating the following areas to determine whether your financial health needs improvement:

Budget. How much are you spending? Can you trim costs by eliminating unnecessary expenditures?

Emergency fund. You should have liquid and accessible reserves that will cover three to six months of living expenses.

Retirement savings. Look at what you’re contributing to retirement plans – such as 401(k)s and IRAs – and consider how your funds are invested. Are changes needed?

Benefits. If you’re employed, determine when your company offers its annual open enrollment window, then review coverage in advance to decide whether you want to make changes.

Taxes. Did you owe money this year or get a refund? Adjust your W-4 accordingly. Remember, while a refund is nice, it really means you’re loaning money to Uncle Sam interest-free.

Insurance. Review your home, auto, and umbrella insurance coverage and determine whether changes are required. Do you need more coverage? Can you afford the deductibles?

Beneficiaries. Ensure the beneficiaries are correctly named on your bank accounts, retirement plans, and life insurance so that your assets transfer to the correct person in the event of your death.

Probate. If you haven’t already, consider setting up your bank accounts as transfer on death (TOD) to avoid probate.

Credit. Review your credit reports from TransUnion, Equifax, and Experian annually. All offer one free report each year; however, you may want to arrange for one every four months throughout the year to ensure you have regularly updated information.

Financial advisor. Be sure you have one.

Is your portfolio ready for summer?

This time of year, most of us are in vacation mode – and the same can be said for the people who drive the financial markets. Investment analysts, traders, brokers, and money managers take vacations, too. And as a result, the summer season is generally a slow time for financial markets, leading to what finance professionals call “the summer doldrums.” It’s an important concept to understand, because it can affect your portfolio.

When financial professionals are out of the office, they aren’t buying and selling stocks and bonds. That leads to reduced activity in the financial markets, and is sometimes referred to as “low volume.”

Interestingly, low volume means greater volatility. Why? Because the few purchases and sales that are completed have a bigger impact on the price of the stock or bond. Think about it: if you sell 1,000 shares of a stock that trades, on average, 100,000 shares a day, your sale is only 1% of the total sales volume. But during the summer doldrums, if you sell 1,000 shares of the same stock that now trades, on average, 10,000 shares a day, your sale has become 10% of the total sales volume.

You may want to keep that in mind as you review your account statements over the summer. Don’t panic and decide to sell just because your investments decline; be sure you have a portfolio that is allocated appropriately for your goals, and then ride the wave. And take heart: the summer doldrums end after Labor Day.